A short sale can come with tax consequences.While doing a short sale if your mortgage was $500,000 in an investment property. You now owe $750,000 as the costs went out of control on that one property. You are set for short sell for $300,000. The bank is going to send you a 1099 at the end of the year for $450,000 as income to you.  On your taxes it may be possible to write off some of this debt, but if you are not insolvent, the IRS may treat this $450,000 or a portion as taxable income.
There is a form you can file with the IRS to get out of paying taxes dependent on your situation. So, make sure to consult with a tax professional in addition to an attorney before going forward with a short sale.
You are also limited to who you can sell a property to in a Short Sale.  You may want to sell to a family member, however the bank may view this as fraud.  You may not be able to arrange a use and occupancy agreement to stay in the home after the sale.  It is possible at times to get cash for keys in a short sale, or moving money, hover neither of these are a guarantee. These draw backs can normally be overcome in a traditional sale, plus you are allowed to financially benefit from the sale.