Sandy owes $28,000 to a Palm Beach Bank on December 31, 2020. She also has an additional $10,000 of credit card debt. Sandy has only $125,000 in assets on December 31, 2020 as well. On January 1, 2021, Palm Beach Bank informs Sandy that they will be discharging her $28,000 debt.

 

Does Sandy have gross income? 

Suppose that Sandy’s $28,000 is not bank debt but is student debt instead. Is the forgiveness of Sandy's debt considered gross income?

 

Suppose that the debt was forgiven pursuant to a federal program which required Sandy to work as a medical professional in rural Nebraska for 10 years?