I read an article about the latest challenge in California about how people with canceled mortgage debt are faced with huge tax bills because the money is "taxable income" in the State of California. The only question I have for the legislature in Sacramento is; Are you guys numb from the neck up?
Seriously, the Feds had this figured out years ago and put a law into place that suspends taxing these losses until 2012. That's pretty forward thinking for Congress no matter how dysfunctional they seem. So, why can't our state do the same thing?
We should have a standing law on the books that says that there are no taxes on any forgiven debt when selling any real property where the sales price meets or exceeds the original debt. It's not that hard to do. They had it in the 2007 and 2008 tax years, how about a quick resolution to bring it back.
If the state lets the law stand, I fully expect to see personal bankruptcies increase this year as a result. You can't expect broke people to pay tens of thousands in taxes and not declare bankruptcy. If the politicians need something else to be scared of, that's certainly worthy. Our state is barely recovering and we need these taxes eliminated.
What do you think?