can i be exempt from 1099 for balance? I had to move for financial reasons to a new state after living in home for 2 years. I tried to rent it but couldn't keep a tenant very long. Either I forclose or go through with a short sale. The problem is that becaue is hasn't been my "primary" residence (even though it has been costing me hundreds every month in spite of renter), the IRS says the deficit of the short sale will count against me as income - I just lost my job. This economy has totaly screwed me - don't know what to do - please, need a CPA who can advise on TX laws.