The California legislature has passed, and Governor Schwarzenegger has signed, a new law conforming California law to the federal law so that homeowners who lost their home in a foreclosure, or who completed a short sale, deed-in-lieu of foreclosure or loan modification during calendar 2009, or after, will not have to pay taxes on the forgiveness of indebtedness, if specified criteria are met.
When there is a forgiveness of indebtedness as a result of a short sale or foreclosure, the amount forgiven is considered income. The federal ...