Californians who underwent a short sale of their homes will not be charged a tax penalty for debt that has been forgiven as part of the deal, the Internal Revenue Service has confirmed. The state's Mortgage Forgiveness Debt Relief Act of 2007, which prevented forgiven home loan debt from being considered income for tax purposes, is slated to sunset at the end of this year. Concerned that the loss of this consumer protection would prompt homeowners to allow their properties to go to foreclosure rather than face a significant tax bill, Democratic state Sen. Barbara Boxer sought clarification from the IRS. The agency's affirmation means that homeowners can move forward with short sales without worrying about a big tax hit, she said. According to the California Association of Realtors, the state will process in the neighborhood of 55,000 short sales next year; and with an average of $60,000 in debt forgiven on these transactions, property owners otherwise would be saddled with a hefty tax obligation.