I recceived a 1099A for a rental property. The FMV in box 4 is the same as the outstanding balance in box 2 ($ 177,584).
Before the house went into foreclouse, I was working on a short sell, but we ran out of time. At the time the house was listed for $70,900. Whenthe house was auctioned. It sold for $70,000. Shouldn't the FMV be the 70,900?
The issue that I am having now is that I have to pay taxes on the difference between the purchase price ($72,000) and the listed FMV($177,584) on the 1099A.
How do I get the 1099A corrected to reflect the correct FMV?

No you do not have a profit so you are not required to report this sale. Form 1099-A is for your information only. If you get 1099-C from mortgage company, then you have to report that amount as income. If box 5 is checked you are personally liable to pay the debt. But since box 2 and 4 are same, you do not have a debt. Your U.S. Tax Return: Foreclosure or Repossession of Main Home (http://taxipay.blogspot.com/2008/08/foreclosure-or-repossession-of-main.html)

I must disagree. ANY sale of a capital asset MUST be reported, in this case on Forms 4797 and Schedule D. The proceeds will be the $70,000 auction price, while the basis depends on how much depreciation was claimed while it was an active rental property.

Further, I believe that, since the property WAS a rental, the difference between the balance of the mortgage and the auction sale WILL be considered taxable income by the IRS UNLESS the house was sold in a non-recourse state like Florida.

Given these facts, the OP should investigate HOW they determined the FMV on the Form 1099-A, AND find out if a Form 1099-C is being issued.