Tax battle over short sales

The governor and the state house are still at an impasse over legislation that would provide tax relief for short sellers - folks who sell their homes for less than the cost of their mortgage. It's a common way of unloading a house and avoiding foreclosure. Congress passed a measure that prevents homeowners from being held liable for paying tax on their canceled debt, and California matched the federal tax laws in 2007 and 2008, but did not pass any extension for 2009. A bill is in the legislature, but the governor says he'll veto it because it includes a penalty for wealthy taxpayers who claim higher tax refunds than they know they're actually entitled to. Senate Leader Darrell Steinberg says that the provision has been part of federal tax law since 2007. With April 15 fast approaching there are countless numbers of Californians who face a much higher tax bill than they counted on. From AP:

If no bill is signed in the next month, San Diego resident Kate Dalcour said she and her husband could be on the hook for nearly $16,000 in additional state taxes. Dalcour's husband bought a condo for $300,000 in 2007. Because of a pay cut, he was forced to sell it in December for $175,000 less than what he owed on it. "It's awful and kind of scary," said Dalcour, a 29-year-old behavioral therapist."'This is money that California would not expect to get under normal circumstances, and it's not very fair."

Not very fair is a good way of putting it.