In 2019, Jules borrowed $500,000 to acquire his first home. He has been enjoying living there as his only residence and until Covid hit in 2020, he was employed and able to keep up with the mortgage payments. However he lost his job in early 2021 and for the past several months has not been able to pay his mortgage payments. His home is now worth $1,000,000 and the balance on the home loan is $400,000. Jules has no other debt. He just doesn't have sufficient cash to pay the mortgage. The bank has agreed to restructure the loan so that the monthly payments are reduced and paid over a longer time. The bank also agreed to relieve $50,000 of the overall debt so that the balance of the loan going forward will be $350,000. What is the tax consequence to Jules.

Answer rating: 100% (QA)

The tax consequences for Jules depend on how the debt forgiveness is treated by the IRS Scenario 1 D... View the full answer