Taxation
Ca. Tax Lawyer Winter/Spring 2015, Volume 23, Number 4
Content
- Bar Business
- Contents
- Irs Rank and Church Tax Inquiries: An Analysis of Proposed Treasury Regulations Under Internal Revenue Code Section 7611
- Key U.S. Tax Considerations for Eb-5 (and Other) Visa Applicants
- Masthead
- Message from the Chair
- Taxation Section 2014-2015 Leadership Directory
- The Effective Tax Administration Hardship Offer-in-Compromise: Improving the Standards of Review and Increasing the Acceptance Rates
- Visiting the Committees
- Information Letter Notice 2013-0036 and Why California's Anti-Deficiency Statues Convert Recourse Debt to Nonrecourse Debt
Information Letter Notice 2013-0036 and Why California’s Anti-Deficiency Statues Convert Recourse Debt to Nonrecourse Debt1
By Douglas L. Youmans and N. Aaron Johnson2
EXECUTIVE SUMMARY
In response to a letter Senator Barbara Boxer sent to the Internal Revenue Service (the "Service") in 2013, requesting clarification as to whether a short sale conducted pursuant to section 580e of the California Code of Civil Procedure ("CCP") resulted in cancellation of indebtedness ("COI") income, the Service issued Information Letter Number 2013-0036 ("ILN 2013-0036"). ILN 2013-0036 states, "We believe that a homeowner’s obligation under the anti-deficiency provision of CCP section 580e would be a nonrecourse obligation to the extent that, for federal income tax purposes, the homeowner will not have cancellation of indebtedness income. Instead, the homeowner must include the full amount of the nonrecourse indebtedness in amount realized."3
On April 29, 2014, the Service issued a clarification of ILN 2013-0036 ("4/29 Clarification") which stated that they had been overly broad in, "… extending our analysis of the federal tax treatment of obligations beyond those [purchase money obligations] described in section 580b(a)(3)."