1099 Forgiveness on Lux shorts

[Paul Yevzikov]

Hey experts was hoping to get some clarification:

The debt forgiveness act, which forgives up to $2M forgiven debt subject to taxation when the bank issues a 1099 during a short:

Is it ONLY for the first $2M of the forgiven debt, -or- is it ONLY for loans that were under $2M on primary residences?

Specific situation is a luxury short sale where the loan amount is $2.5M, and approval is for $1.5M.

Will the seller get the 1099 for the entire 1M forgiven between original $2m and my $1.5m purchase, or will it just be the $500k to be taxed between the $2.5 and $2M limit.

Also backup question - if they can show they're insolvent at the time, will the F982 take care of the total amount, or no?

Don't see this everyday, so please advise.

Paul