Phil's Real Estate Blog

Attorney General Opinion
RE: Tax Issue Affecting SHORT SALES

Late Wednesday, Maryland Attorney General, Doug Gansler released his opinion as to whether or not a local jurisdiction can collect transfer and recordation tax on forgiven debt in a short sale transaction (see 1/22/2010 Legislative Alert for background).

Read the Attorney General opinion here >>

Before more than 200 REALTORS^® in attendance at MAR's Legislative Day, Mr. Gansler explained his Assistant AG's position that this practice is inconsistent with Maryland law. Specifically the Attorney General of Maryland opinion is as follows, "Counties do not have the authority to include debt forgiven by the seller's lender in calculating consideration on which the recordation tax will be calculated."

MAR's Vice President of Legal Affairs, Chuck Kasky is backing the position, "This is the definitive statement on the law as of today. Attorney General Gansler spoke to REALTORS^® last night and was very clear that the definition of "consideration" is a matter of state law and until a court says otherwise, a county cannot tax excess debt in a short sale."

The Attorney General opinion does reference that the practice of collecting on forgiven outstanding debt is not specifically prohibited in Maryland law. As such, PGCAR is partnering with MAR, GCAAR and AACAR in promoting legislation in Annapolis to prohibit taxing outstanding debt. At the present time there are several State Senators and Delegates ready to move legislation through the General Assembly. At such time when it becomes necessary we may issue a REALTORS^® Call-To-Action urging members to contact their political representatives on the issue.