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Yes - you need to report the disposition of the property - report it as a sale at the fair market value (FMV) reported in box 4.
Because box 2 (balance outstanding) is less than the FMV - there is no loan forgiveness in your situation and you should not expect a form 1099C.
Your loss is based on your adjusted basis.
If you dispose a rental property - you need to report the sale transaction on the form 4797 - www.irs.gov/pub/irs-pdf/f4797.pdf
Here are instructions - www.irs.gov/pub/irs-pdf/i4797.pdf
The loss will be transferred to form 1040 line 14 and may be fully used to offset other taxable income.
Generally - yes - losses may be carried to other years - but there are some rules how to accomplish that. If you have significant losses this year - most likely - you will have a NOL - Net Operating Loss. Please see for reference the IRS Publication 536
Generally, if you have an NOL for a tax year, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carry back period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carry forward period).
You can, however, choose not to carry back an NOL and only carry it forward. See Waiving the Carry back Period in the publication referenced above.
You cannot deduct any part of the NOL remaining after the 20-year carry forward period.
To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carry back period under section 172(b)(3) of the Internal Revenue Code. If you do not file this statement on time, you cannot waive the carry back period.
Claiming a NOL is relatively complex area of the tax - so most likely you would need a help from the tax professional - but considering total amount of losses - it might worth trying.
Let me know if you need any help or clarification.
does it matter that a bankrutpcy was filed and this prperty was included in the BK? do i still keep the NOL?