I have to pay taxes on a short sale. Does it help if I start contributing to my 401k to reduce taxable income?

I short-sale my property in 2008. I'll receive a 1099 from lender with "gains" for $60,000. I don't know what to do to minimize my tax exposure. I was thinking about start contributing as much as possible to my 401k plan during this year to reduce my taxable income. Is this a good idea? What else can I do?

Public Comments

1. You can open an IRA and put $5000 in it to subtract from your income....duh.
2. What you need to do is develop a relationship with a tax consultant or financial planner who is savvy in tax matters. Buy some face time and avoid these bad tax surprises. Get control of your financial life A 401(k) is always a good idea. But it won't help you for last year.
3. Can't hurt to put money into a 401K, but isn't going to make much of a dent in the tax you have to pay if you have to pay tax on the $60,000.
4. See if you qualify for recently passed relief using IRS Form 982 http://www.irs.gov/irs/article/0,,id=179073,00.html
5. see a good tax accountant. Pay the money...it's worth it. But yes, maximizing 401k will help though won't eliminate the tax. Basically will cut it in half. (assuming 15% capital gains rate versus 28% ordinary income rate).