A lender tend to, once in a while, forgive certain portion of a borrower’s loans, otherwise slow down the prominent harmony. The overall income tax rule you to relates to any debt forgiveness was that the number forgiven try handled while the taxable money for the borrower. Some exceptions to that particular code appear, but, up until 2007, whenever a loan provider forgave some part of a mortgage obligations to have that debtor was myself liable (such within the so-titled “short conversion process,” property foreclosure and you may “workouts”), new debtor was required to shell out tax to your personal debt forgiven. Read More