Is certain income from the discharge of indebtedness included in gross income?

Certain income from the discharge of indebtedness is indeed included in gross income under the Internal Revenue Code. This includes situations where a lender forgives a debt, which is treated as a gain that must be reported as income by the borrower.

When a debt is discharged, the borrower effectively receives economic benefit, which is why it is considered taxable income. For example, if someone owes $10,000 and the lender decides to forgive that debt, the borrower must include that $10,000 in their gross income for tax purposes.

There are specific exclusions and circumstances, such as bankruptcy or insolvency, where discharged debts may not need to be reported as income, but as a general rule, the default expectation is that forgiven debts are seen as income. This principle holds true regardless of the circumstances surrounding the forgiveness, making it essential for individuals to understand how these situations affect their tax filings.