Are short sales ruining home values?

Q: My neighbors bought a home for their mother, who has since passed away. They owed $125,000 on the mortgage. The bank allowed them to do a short sale for $56,000. The three daughters who bought the home for their mother have considerable assets. How can they be forgiven for this debt by the IRS if they are not distressed?

The people who are doing the short sales are ruining the values of our homes, yet we have always made our payments on time, and owe much more than these short sales. Can you please explain this to me?

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