Unfortunately, your accountant is correct; however, since you had debt discharged in bankruptcy, the amount by which the basis of your property must be reduced will depend on how much debt you still have after the bankruptcy discharge and the total bases of all property you still have, plus any cash on hand.
In your case, because the rental property is still subject to the mortgage debt, that debt should be included in determining whether the aggregate bases of your property exceeds your total remaining debt. Unfortunately, however, it's impossible to give you a quantitative answer without knowing all of the facts and circumstances of your case. You should speak in more detail with your accountant and make sure you understand exactly how much he thinks the basis must be reduced, and why.
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In most circumstances, forgiveness of any portion (or all) of a loan is considered taxable. It seems that your CPA gave good advice.
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I suspect you might have been depreciating the property over the years which adjusts your basis downward.
If you sell the house for more than the basis (or adjusted basis) that is gain regardless if you actually net any proceeds.
For example, investor buys a property for 200,000, takes out a $175,000 interest only mortgage, and owns it for 7 years. Each year, the investor claims $12,000 in depreciation on his taxes. The investor goes to sell the property (capitulates due to real estate crisis), short sells it, and only gets $150,000. However, the adjusted basis of the property is $104,000 ((12,000 x 8) - 200,000)). So, this investor has a realized, taxable, gain of $46,000 even though the investor is not pocketing any money.
Also, the bankruptcy has nothing to do with this issue. The issue is straightforward capital gains tax. If you have gain, it is taxable; so you must find either an exception or other losses to offset.
The CPA does seem to know what he or she is doing...sorry.