Unsettled State Income Tax Consequences Of Debt Forgiveness On Short Sales, Foreclosures, Loan Mods Leave Some California Residents In Limbo

In Sacramento, California, The Sacramento Bee reports:

• Accountants say rising numbers of California taxpayers who did short sales or received loan modifications in 2009 now fear they will be walloped anew by a cash-starved state government intent on taxing their forgiven debt. It's impossible to ease the fears or specifically answer many questions, these accountants say.

• "We've had quite a few clients fall into that category," said Jennifer Neronde, office manager at Rocklin-based Cramer and Associates CPA. Uncertainty reigns with less than six weeks before the April 15 filing deadline because the forgiven debt question has gotten caught up in a larger tussle over business taxes between the Legislature and Gov. Arnold Schwarzenegger.

For more, see California tax law unsettled on home short sale.