Anyway to avoid taxes on rental short sale?

Is there any way at all to avoid paying taxes on a short sale on a rental property? I paid 125k for it, put 2 new furnaces & water heaters in, plus a few grand in other items, trying to do a short sale. I work with short sales, so I know all about them. I'm looking at the tax end of it....I'm getting an offer for 50k, and mtg balance is 133k or so, plus realtors comm, taxes, etc, I'd get a 1099 for like 90k. I need to know, is there a way to avoid paying taxes on it, or should I declare bankruptcy to wipe out the tax debt? Also, will BK wipe out IRS debt? Any t would be great. FYI, 90k is about 3x what I make in a year.