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

The correct answer is that certain income from the discharge of indebtedness is included in gross income. When a debtor has a debt forgiven or discharged, the amount forgiven is generally considered taxable income by the IRS. This means that borrowers may need to include this discharged debt amount in their gross income on their tax returns. There are, however, specific exclusions and exceptions where certain discharged debts may not be included in gross income, such as debts discharged in bankruptcy or certain qualified student loans, but these are the exceptions rather than the rule.

Understanding when debt discharge counts as income is important for accurately reporting and determining tax liability, as this has implications for financial planning and tax obligations.