Yep, the debt foregiveness is "income" in the eyes of the IRS, and taxable. However, if its on your primary residence, its exempt. Also exempt if you are insolvent when the property goes back, also exempt if you declare bankruptcy.
I believe there's also a defense to taxability if you live in a state like Washington, where the only remedy the creditor gets in non-judicial foreclosure is the property back, and the deficiency is automatically waived by the creditor just by virtue of creditor having chosen that method of foreclosure. Because the creditor chose the method of foreclosure, I think the so-called "income" from debt foregiveness would be "income" assigned by a third party, which is not taxable.
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Today's Featured Article - Third Brush Generators - by Chris Pratt. While I love straightening sheet metal, cleaning, and painting old tractors, I use every excuse to avoid working on the on the electrics. I find the whole process sheer mystery. I have picked up and attempted to read every auto and farm electrics book with no improvement in the situation. They all seem to start with a chapter entitled "Theory of Electricity". After a few paragraphs I usually close the book and go back to banging out dents. A good friend and I were recently discussing our tractor electrical systems when he stated "I figure it all comes back to applying Ohms Law". At this point
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