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Recourse loans are a state law thing. In California, for example, most loans to purchase a house are non-recourse. But most refinancings - WHETHER OR NOT YOU GET CASH OUT - are recourse.

Peter, I have a question for you (and any others who would like to chime in) about the new law exempting short sale or foreclosure 1099 income from being taxable.

I have heard that California law supercedes the new federal law and the anyone in California who realizes 1099 "income" due to forgiven debt will, in fact, have to pay the income taxes on it. Can anyone comment on this? .

Please assume we are talking about a non-recourse loan, for hypothetical purposes. And that the home was a primary residence for at least the past 2 years, and that it was purchased for 100% financing and is now $150,000 upside down on value vs. amount owed.

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