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Your basis are 148K and your proceeds are lower of FMV or outstanding principle, which in your case will be 174.864. What the property was sold for is irrelevant because at that point the property already belonged to the bank, not you anymore. If you used the property as your primary residence for at leas 2 out of 5 years, yes you will qualify for the capital gain exclusion, you will be able to exclude the gain.
Now, regarding the cancellation of debt, form 1099C, the mortgage forgiveness act that allowed to exclude canceled debt from your principle residence was extended through 2014. Unless government decides to extend it again, than you will not be able to use the exclusion. Because the property was sold for less than the principle, you will get 1099C, most likely sometime next year.
Good news. It looks like government already voted on the proposal to extend the mortgage forgiveness act for additional 2 years and it passed couple month ago. Which means, if you get 1099C this or next year, you will be able to exclude it.
It is now extended through 2016.
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