Tax Articles
Introducing Our Firm
Our Services
Real Estate Taxletter
Need Help?
Other Websites
Site Map

Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Connect on Google+

Does a new California law change tax consequences of a short sale?

October 9, 2014

From:  David
Date:  05 Dec 2011

How is your article, "Tax Consequences of a 'Short Sale' of Real Estate vs. Foreclosure," changed for Californians by Senate Bill 458 that recently became law? Are all amounts not repaid considered non-recourse and therefore not taxable? Will you update the article?


Date:  12 Dec 2011

Hello David,

Thank you for writing. Senate Bill 458 extends anti-deficiency protection to junior mortgages in addition to first mortgages for residential housing up to four units, which were covered by Senate Bill 931 earlier in the year.

I discussed this issue with an attorney friend. It seems to us the home mortgage after refinancing is still non-recourse, because the short sale requires the lender’s consent. Until the lender gives consent to the short sale, the lender isn’t limited to the proceeds of the property for satisfaction of the loan.

Based on that understanding, my article is unchanged, except adding some discussion about the two statutes. I will be writing an update in January 2012.

This may not be the last word on this issue. I expect to see litigation about whether the status of mortgages has been changed to non-recourse in the future, but we may not see rulings on the issue for years.

Best wishes,
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Can I include my home in India as my vacation home on US tax returns?

Home | Real Estate Taxletter | Articles | FAQ | Introducing Michael Gray, CPA | Need Help? | Other Links

Michael Gray, CPA
2190 Stokes St., Suite 102
San Jose, California 95128-4512
(408) 918-3162
Fax (408) 998-2766
email: mgray@taxtrimmers.com
© 2016
Subscribe to
Michael Gray, CPA's
Real Estate Tax Letter