Legal Question in Real Estate Law in California

Re: foreclosed house

Yep, the Internal Revenue Code treats forgiveness of debt as "income" and considers the difference between what you owed and what the lender can get under California laws preventing the lender from going after you for a deficiency (in most cases) as a species of forgiveness of debt.

I have no specific news on the subject, but I may have heard a rumor that Congress is considering changing this nasty aspect of the tax code.

Can the IRS put a lien on your other house? Well, the IRS is extremely good at putting liens on stuff, and if it gets the idea that you owe them money, sooner or later it will put a lien on something you own, maybe even your personal liberty if it thinks you are deliberately under-reporting and/or under-paying taxes due.

I'm not a tax practitioner, and I don't always keep up to date on pending tax-law changes, but so many voters have been or are about to get hit with the forgiveness/gains tax, I wouldn't be surprised if it is changed or repealed soon, if not already.

Re: foreclosed house

Your question provoked my curiosity, so after my prior answer I went to the IRS Web site and found that the law has indeed been changed. Try this URL to read the announcement on the IRS Web site; it was posted 2/4/2008!

http://www.irs.gov/newsroom/article/0,,id=174034,00.html