What is the name of your state?NC where short sale occured, currently living in CAI had a home in North Carolina that had to be sold through a "short sale" due to economic conditions. It closed in 2003 but I never received a 1099-C. Just a month ago, I received an IRS audit demanding over $3900 in taxes (Federal) for $14k loss on sale of home. I never had received copy of 1099-C, also I had PMI insurance which reimbursed the bank the full $14k loss and yet I have to pay taxes on this??? Bank got all their money so it doesnt seem fair that I should get stuck with the bill. What are my legal rights in this matter?