As you and others note, you really have to ask an accountant. However:

You would have an INCOME of $45.000 on the condo--the amount of debt forgiven by the bank. Then, depending on your tax bracket, you'd owe income tax on that amount--possibly from $5,000 to $10,000 or more. (Your tax bracket times that amount of income.)

Further, as with all short sales, you wouldn't receive a penny.

On top of that, you have to demonstrate "hardship" of some sort to do a short sale. Maybe a job loss. Maybe illness. You'd have a difficult time saying to a lender: "I'd like to do a short sale. There's nothing really wrong with my situation, except my condo's lost a lot of its value." In that case, you'd be likely to be facing foreclosure, not a short sale.

And the math is just bad. You put $65,000 down on a $185,000 purchase. Why so much? And you'd be throwing it all away. Look into other options, such as renting the condo out. And absolutely talk to an accountant.

You do need to ask an accountant, but I am pretty sure I am correct in the following statement:
You're not losing anything - the bank is. The only loss you have would be cash you put for the down payment. The 1099 you get is INCOME to you, because the bank is forgiving you a debt.

This is definitely not something any Realtor is qualified to answer. Your instinct about asking an accountant is correct; they are the ones who know about taxes. So sorry you're in this situation. Good luck!