Any news from CA @ Mortgage Forgiveness

[tilt53]

I have a couple of clients who swear up and down that everyone (yeah, right), the news, magazines, newspapers etc. are all saying not to pay the state if they owe for a loan mod, but file an extension instead because "something's gotta give."

Nothing I have seen or heard indicates that CA plans on conforming, especially since the Gov vetoed the last bill. All I can do is hand them an extension form and explain the pitfalls.

[S T]

Calif Conformity

This link was received through Spidell last week

http://www.caltax.com/Hot%20News%20and%20Notes/Pages/NoCODreliefyet.aspx

Spidell is recommending extensions - as their might be partial conformity.

Sandy

[tilt53]

Partial conformity at least would be nice. The problem is my TPs don't want to pay anything with extensions. I've documented that I've told them the risks, but hey, it really is up to them.

[S T]

Same Position

I just completed a phone call with one client - they are making the choice to not send any monies with the Calif Extension.

I think Calif is holding out on this, so they can bring tax money into the Coffers by April 15, then will hold up any refunds at a later date. That cash flow thing

Sandy

[Y2KEA]

Breaking news...

SACRAMENTO, Calif. -- Californians who were hurt by the housing crisis could soon receive a measure of good news that would save them thousands of dollars in taxes.

The Legislature passed a bill Thursday helping homeowners who received mortgage modifications, lost their homes to foreclosure or sold their houses for less than they owed on their mortgages.

The bill would prevent the canceled debt from being treated as taxable income. It conforms California law to a federal tax change that runs through 2012.

The Assembly and Senate passed the bill after removing a tax-related provision that drew objections from Gov. Arnold Schwarzenegger. Some Republicans continued to oppose it because it introduces other taxes.

The bill now goes to the governor's desk.

(Copyright ©2010 by The Associated Press. All Rights Reserved.)

[JSLATER]

Spidell 4/08/2010

COD and other conformity — Gov's signature expected

We are awaiting the governor's signature on SB 401 (Wolk), which will partially conform California to the federal COD exclusion for principal residences, as well as numerous other changes enacted since January 1, 2005. While the partial COD conformity will be retroactive to taxable years beginning on or after January 1, 2009, most of the other conformity items will not be effective until the 2010 taxable year.

Like the federal exclusion for qualified principal residence debt, the exclusion will apply to discharges occurring on or after January 1, 2009, and before January 1, 2013. However, here are the California differences:

Qualified principal residence indebtedness may be limited to $800,000 ($400,000 for married filing a separate return) instead of the federal $2 million ($1 million for married filing a separate return); and
The maximum cancellation of debt income (COD) exclusion may be further limited to $500,000 ($250,000 for taxpayers married filing separately).
Some of the other significant conformity provisions, most all of which take effect beginning with the 2010 taxable year, include:

Surviving spouse may exclude up to $500,000 if sale of principal residence occurs within two years of death of the spouse;
Gain from sale of principal residence attributable to nonqualified use can't be excluded;
Increased penalty for failure to file partnership and S corporation returns (partial conformity);
Increased minimum penalty for failure to file individual returns;
Waiver of early withdrawal penalty for public safety employees and individuals called to active duty;
Kiddie tax age increase; and
Inflation-indexing for the active participation limitations on traditional IRA contributions;
Some of the more significant federal provisions to which SBX9 32 does not conform include:

HSAs;
IRC §529 enhancements, allowing payment for computer equipment and Internet access expenses;
S corporation BIG changes;
Private mortgage insurance deduction;
Depreciation provisions related to bonus depreciation, 15-year property classification for retail, restaurant, and leasehold improvements, and many other recent changes; and
Increased §179 expensing election above $25,000.

[superman]

New Information

Just called Drake and they said that the program will be updated soon to reflect the new law. Now it is just a waiting game and hopefully before the 15th.

Superman