Cancellation of debt o rental.

[ljwalters]

Client sold rental house on short sale. Got cancellation of debt. The sale goes on the schedual E. Where does the 1099C go, on the E as income or the 1040 as other income?

Also can insolvency work for this cancelation of debt even though it was a rental.

I know I have done one of these a couple of years back but the losses on the rental wiped out the cancelled debt.

This time the cancelled debt is to high

[joanmcq]

Insolvency works for rentals.

[jainen]

>>losses on the rental wiped out the cancelled debt<<

Possibly this time the cancelled debt will wipe out the loss. Remember to reduce tax attributes on Form 982. They don't get a capital loss for money they never had to pay.