Cancellation of debt and short sale

[NotEasy]

Taxpayer had a short sale of his former primary residence in 2009. He had a loss of about $300,000 which is not deductible (personal loss). But he also received a Form 1099-C which reported the cancellation of debt at the amount of about $200,000 because it was a short sale. Can he use the loss from the sale to offset the $200,000 cancellation of debt?

[JG EA]

Taxpayer had a short sale of his former primary residence in 2009. He had a loss of about $300,000 which is not deductible (personal loss). But he also received a Form 1099-C which reported the cancellation of debt at the amount of about $200,000 because it was a short sale. Can he use the loss from the sale to offset the $200,000 cancellation of debt?

No, he can't do that, but in Form 982 there are a couple of things that may help. Was the debt all acquisition debt? If so, that may help your client. If not look at insolvency.

There are several threads you may want to check out under "Short Sale".