There was been much speculation regarding the extension of the tax relief for Central Valley distressed homeowners beyond the December 31st expiration date. Everything I read indicates that an extension is expected but given the turmoil in D.C. no one knows for sure. I discussed the situation with my accountant and he pointed out that distressed home sellers may qualify for an insolvency exception. Insolvency means your liabilities exceed your assets. My accountant thought that retirement funds may be exempt when determining insolvency. Almost every Central Valley short sale seller I work with is insolvent. The government makes an exception for insolvent sellers paying taxes on the canceled debt. The following article covers the subject very thoroughly.
http://taxes.about.com/od/income/ss/mortgage_cancel_5.htm
http://taxes.about.com/od/income/ss/mortgage_cancel.htm
Please note I am providing the links for informational purposes only. Please consult with a CPA and attorney regarding your specific situation. I specialize in Central Valley short sales. I am a Manteca short sale listing agent, Tracy short sale negotiator, Lathrop short sale specialist, Stockton real estate agent, Lodi short sale agent.
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