Schwarzenegger expected to sign short sale tax relief bill

• Would stop state from collecting taxes on short sale ‘windfalls’
• Conforms state tax law to federal

Californians who lose their homes to foreclosures and short sales would not be hammered with a bill for state taxes on the “forgiven” debt under a bill approved by the Legislature Thursday and which is expected to be signed by Gov. Arnold Schwarzenegger.

SB 401, authored by Sen. Lois Wolk, D-Davis, whose district includes some of the most distressed real estate in the nation, exempts borrowers who lost homes last year from state taxes.
It’s estimated that about 100,000 homeowners will benefit.

The bill generally conforms California personal income tax, corporation tax, and administration of franchise and income tax laws to federal income tax laws as of Jan. 1, 2009. The bill also conforms to one provision of federal tax law enacted in 2009, from the Recovery and Reinvestment Act of 2009 by excluding income grants made-in-lieu of federal renewable energy tax credits.