For a total list of all the real estate laws digested by first tuesday for the 2009-2010 legislative session, click here.
Topics:
- Discharge of taxation on indebtedness
- Married couple exclusion of gain still available after spouse’s death
Reported by Alex Gomory
The rules reported here outline the new revisions pertaining to the taxation of principal reductions.
Discharge of taxation on indebtedness (principal reductions)
Revenue and Taxation Code §17144.5
Amended by S.B. 401
Effective: Immediately
This law extends the tax exemption for discharge of qualified principal residence indebtedness income to debt forgiven on or after January 1, 2009 through January 1, 2013. No penalties will apply to discharge of indebtedness owed in 2009 for the principal reduction on his 2009 tax return.
Discharge of indebtedness income received before January 1, 2013 will not be taxed on a reduction of up to $500,000 ($250,000 if a married individual files a separate return).
If a debt forgiven exceeds $500,000, the amount over $500,000 is taxable.
The rules reported here reveal the amount protected from taxation when a homeowner sells a property after a spouse’s death.
Married couple exclusion of gain still available after spouse’s death
Revenue and Taxation Code §17152
Amended by S.B. 401
Effective: Immediately
A homeowner may claim the full $500,000 married couple exclusion of gain realized on the sale or qualified exchange of a property within two years of a spouse’s death provided the deceased spouse was eligible for the exclusion prior to his death.
