1099-A How to File

I owned a house in Fl that was purchased as our primary resident. Because of a job change we did not live there for 2 years so under the IRS rule it was never our primary residents. I also lost my job but my spouse continued to work. I have since then retired because I was unable to obtain employment. We had 2 loans out on the house. In 2010 we did a Deed-in-lieu and I received two 1099-A's. Because we couldn't sell the house from 2006 to 2010 we rented it out for periods of time. Over the years we have had offers for short sales that were greater then the FMV on the 1099. The bank refused to do a short sale so in the end we did the Deed-in-lieu. The IRS told me to fill out a form 4797 and treat the home as a business with profit and loss.

The FMV on both 1099's is $515,000. One loan balance is $580,275 and the other is $100,527. For the tax returns the gain would be the FMV minus the balance of principal. On one loan it's 580,275 - 515, 000 = 65,275. For the other loan, 580,275 - 100,527 = 479,748. Is my capital gain for this $545,023. This doesn't seem correct. So now I have to pay taxes based on $545,023 and did not get a debt forgiveness for the loans so the bank can still go after me for the loans.

Is this correct?

Thanks,
Mark