Hady Chahine

Distressed homeowners will no longer need to pay California state income tax on debt forgiven from a short sale, foreclosure, or loan modification. Passed into law yesterday, Senate Bill 401 generally aligns California's tax treatment of mortgage debt relief revenue with federal legislation. Pertaining to debt forgiven on a loan secured by a "qualified principal residence," individuals will now be exempt from both federal and state income tax penalties. The current federal exemption is for indebtedness up to $2 million, whereas the California State Senete Bill 401 exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

"Qualified primary residence" indebtedness is defined as debt incurred in purchasing, developing, or substantially bettering a principal residence. It includes both first and second trust deeds. Additionally, it includes refinance loans to the extent the monies were used to payoff a previous mortgage loan that would have qualified.

The tax breaks affect financial obligations discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim their exemption by submitting a Form 540X amendment.

Taxpayers who do not qualify for the aforementioned exemptions (e.g., second home or rental property) may possibly be exempt under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

To learn more about mortgage loan forgiveness tax consequences, go to California Franchise Tax Board's Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service's Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill 401 is available at www.leginfo.ca.gov.

HHC South Bay Real Estate Agents

5117 Beran Street in Torrance is a brand new listing just hitting the South Bay MLS. April 16th from 12pm-2pm we’ll be hosting a brokers open to showcase the house. Located in the Southwood section of Torrance this well maintained home's highlights include recently upgraded bathrooms, double paned windows throughout, gleaming hardwood floors, canned lighting, forced air heating, copper plumbing and an upgraded electrical panel. To get more details or to schedule a private showing go to 5117 Beran St., Torrance.

In 2008 the South Bay Association of Realtor reported that for Hermosa Beach overall housing sales (single family homes, condos/townhouses, residential income) were down 37% compared to 2007. Although 2008 as a whole was a very down year there were some signs of a rebound in December with 12 sales compared to only 7 in December 2007.

You can read the entire market recap at 2008 Hermosa Beach Real Estate Market Report. You can also look at the current Hermosa Beach MLS real estate listings here.

2008 was a unquestionably a difficult year for home sellers in the Torrance real estate market. According to the South Bay Association of Realtor overall sales for the year were down 15% compared to 2007. However there were some interesting market developments towards the end of the year that may indicate a brighter 2009 for sellers.

For the complete analysis of the 2008 real estate market go to Torrance Real Estate Market Recap for 2008.

Results for December put a cap on what was a very tough year for home sellers in Manhattan Beach. According to the South Bay Association of Realtor there were only 14 home sales (single family homes, condos/townhomes, and residential income) for the month of December the exact same number of homes sold in January.

Despite the overall tough market December did show some signs of life. The average price of a sold home actually increased .6% from the start of the year. More telling the percentage of sale price to original list price increased from 91% in January to 96% in December. For the complete Manhattan Beach market analyis go to Manhattan Beach Real Estate Market Recap for 2008.