Tax Savvy Experts Needed!! Foreclosure question for CA?

Question

HELP out there!! Okay, my question is: if a homeowner in CA goes into foreclosure with a mortgage balance of 500k, bought the place say 2 years back for 600k, and the place goes to auction and gets only 400k, does the homeowner get taxed for the shortage, as he would if a lender was to forgive him a debt of that same amount? I find myself running into more and more foreclosures, and This is a scenario that is bound to happen to any number of my clients/prospects any day now. Thanks in advance for you input.

Answer 1

Unfortunately, yes, unless he was insolvent at the time, which is often the case when someone's home is foreclosed.