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The COD income is 224,100 dollars. However, the reportable amount may be less if the client was insolvent immediately before the short sale. Although you sound like someone who understands finance principles and insolvency, I will review the definition because these answers are searchable and viewable by others. Insolvency means the client's total liability
balance is greater than the total fair market value of the all the client's cash, stocks and bonds, real estate, retirement
accounts, and all other assets
. The difference that liabilities exceed asset values is the amount that can be excluded from the taxable canceled debt income.
The gain or loss would be the difference between the sales
price on the short sale and the client's adjusted basis. In your client's case that would be a 5,576 dollar loss.
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