California enacts mortgage forgiveness debt relief.

• Position: Giving back

A new stare law (SB 401) allows most taxpayers to exclude canceled mortgage debt income of up to $500,000 on their principal residence. The limit is $250,000 for married/registered domestic partner individuals filing separately. It applies to debt forgiveness in 2009 through 2012 resulting from a foreclosure, "short sale" or loan modification of a taxpayer's qualified personal residence.

The law largely brings California into conformity with the federal Mortgage Forgiveness Debt Relief Act for discharges that occurred in tax years...