If you are familiar with the IRS their perspective is that if you recieved any monetary gain you are to report that gain to the IRS. In the realm of short sale the federal government did pass the mortgage forgiveness act in 2007 that did bring relief to homeowners that were in the position of having to report this "gain" to the IRS. The Obama administration has extended this program that would deny a lenders ability to pursue a homeowner with a 1099 for the "gain" they recieved as a forgiveness of a loan. This is for a homeowners primary residence only. I hope that this information helps!
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