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Let me see if I have the fact pattern down. You have a property with a $260k basis, with a FMV of $300k, and a mortgage on it of $400k. The property is going to be short-sold for the $300k FMV. In addition you have $100k of suspended passive losses that will be triggered when you sell the property.
Is that an accurate summation? If so, you will have a sale for $300k less your basis of $260k, for a net gain of $40k, plus $100k of mortgage cancellation, so total gain of $140k, less the suspended passive losses of $100k, leaves you with taxable income of $40k.
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