Does forgiveness of debt count as income?

Grudun answered 3 months ago …

Unfortunately in most cases the answer in yes. Generally when a transaction is completed(ie you are paid or the debt is written off) you record the effect on you net income as income or a loss. There are some exceptions(such as if you sell your home in a short sale right now and some debt written off in bankruptcy proceedings) but in most cases the government wants its money. I would consult a CPA or tax attorney. Also you may want to look into why the company is willing to write off the debt because if it is not done properly entities the company writing off the debt owes money may come after you if they can't pay their debts. You also want to consider how this will be reported to credit reporting agencies because it could hurt your corporate credit rating and cost you money in the long term.