Does CA State tax Cancellation of Debt income for Primary residence

[gloretired]

This is not a short sale. It is a Cancellation of Debt for a second mortgage.  Does the state of CA tax this amount?  I cannot find anything on CA Franchise Tax Board that clearly helps.

[hbl3973 · Accepted solution]

Nothing related to Federal 1040 Line 21 income on the California Schedule CA includes exclusion of that specific debt cancellation.

Looking further at the more comprehensive CA FTB publication 1001

https://www.ftb.ca.gov/forms/2015/15_1001.pdf

page 13 specifically discusses reporting of cancellation of debt on the disposition of your primary residence.