Short sale?

[ILLMAS]

TP personal residence was rented for 40 months out of 60, so there is no exclusion, secondly her basis on house is $190K and the bank accepted an offer of $42K (sales price) resulting in an $148K loss, there is also a limit coming from PAL of $124K making the total loss ($24K), my question, is the TP entitled to this loss even though she didn't walk away with any money? 

Thanks

MAS

I know eventually the TP will be receiving a 1099-C.