I purchased a condo (primary residence) while living in CA in 2006 (April). I moved to NC because of my job in August 2007, so I rented the condo out (at a loss each month). I had to short sale the condo in September 2009 because I couldn't pay rent here and the mortgage there. I received a 1099-S listing the sale price as 'gross proceeds.' Is this supposed to be listed as income on Sch. D? What are the tax consequences for the short sale? My debts are greater than my assets--so can't this be exempt??