Taxpayer owes credit card company $2,000 and refuses to pay in December, Year 1. In February, Year 2, credit card company decides to cancel the debt rather than pursue collection. What are the tax consequences to Taxpayer? 

Taxpayer has no gross income because the credit card company made a voluntary choice not to collect. 

Taxpayer has no gross income because there was no settlement agreement executed. 

Taxpayer has gross income of $2,000 in Year 1 because of the refusal to pay. 

Taxpayer has gross income of $2,000 in Year 2 when credit card company cancels the debt.

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