1099-C Income and NOLs for RE Investors who Short Sale/Foreclose

This was asked in the Short Sale forum, but I thought I’d pose it to the tax experts on this board…

The Mortgage Relief Act of 2007 allows homeowners to exlude any 1099’s they receive from lenders losses due to a short sale or foreclosure of their PRIMARY residence in 2007, 2008 or 2009. However, for investors (some losing mutliple properties this year) the 1099’s cannot be excluded.

I only know of one example among my short sale clients where an investor short sold 3 properties and received about $120K in 1099’s from the shorted lenders. She is attempting to offset the income with NOL’s from this year and up to 2 years prior. I don’t yet have any info on whether she was able to cut down the tax.

Any tax experts have any thoughts on this and how investors can manage this additional income added to AGI? Can investors with corporations do any kind of income-splitting strategies? Also, didn’t Congress concede an IRS statute that allowed corporations to go up to 5 years back to apply current year’s NOLs to past tax bills??