short sale of 2nd investment house

A very good question - I am not an expert in this area, but hang tight, and one of our members with more experience in the tax implications of short sale will be along to help.

That is a good question and a very tricky one. It really all depends on your situation. I sold my home through a short sale last year and ended up with no tax implications. BUT, this was my primary home and I was covered 2 ways-with the Mortgage Forgiveness Act and insolvency.
Honestly, best bet is to consult a tax professional on this one because there are sooo many loopholes and it is very confusing.
Make sure to ask them about insolvency. That may help you.
Good luck!

Actually if you have the investment property under a corporation you could incur a capital loss.