Legal Question in Real Estate Law in California

Re: real estate

You are confusing a few things here; hopefully I can clear them up for you. A 1099 is simply a reporting document that indicates the receiver of the document received money, or other consideration (forgiveness of debt in the case of a foreclosure) from a party or company. You almost certainly will get a 1099 right after the end of the year in which your home was foreclosed by a lender. Just because you receive the 1099, however, doesn't mean that you owe taxes on that income, or in the case of forgiveness of debt, the "imputed income". At the Federal level, legislation was enacted (as a part of the flurry of bills attempting to rescue the housing industry) that exempts from income any forgiveness of debt incurred by a homeowner whose primary residence was lost in foreclosure until 2011. As such, you would owe no Federal income taxes on that reported "income." The State of California recently enacted parallel legislation which also protects homeowners who lose their primary residence to foreclosure from having to pay income taxes on the imputed forgiveness of debt income. You must check with your tax advisor to see if you qualify as there are beginning and end dates on these statutes, and foreclosures outside of that timeframe will not qualify. Also, the home must have been sold by the bank, under its power of sale at a legitimate foreclosure sale. A "Deed-In-Lieu" would not, as I read the statutes, qualify for exemption from income taxation. I don't think that's what you meant when you included that language in your post - a deed-in-lieu is a deed you sign giving the home back to the bank. That is very different from a foreclosure, and is rarely accepted by lenders, so I'm pretty sure you did not actually mean that. Please do talk to a tax advisor (CPA or your accountant) as tax matters change constantly, and they (or a tax attorney) are the only ones really qualified to render an opinion as to your personal tax situation.

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