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 - What Oil Should I Use? - by Francis Robinson. I keep seein this question pop up over and over again in discussion groups all over the web. As with many things there are often several right answers and a few wrong ones. Some purist I'm sure will disagree to no end with what I will tell you but most of us out here in the real world don't really care do we ? Some of them only bring their noses down out of the air long enough to look down them anyway. If you are like me you are only doing this old tractor stuff because you enjoy it. You
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