How much income will Ted and Alice include in gross income

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Question - It was a tough year for Josh and Allie. Both of the them lost their job, their principal residence along with their matching BMWs in the garage were burned to the ground in the CA wildfires, they spent all of the insurance money they received to rebuild their house, only to find it was only worth $750,000 now. They had purchased the house 4 years ago for $1,200,000 when things were going well for them. Their $1,000,000 mortgage was paid down to $925,000 when they lost their jobs and stopped making their mortgage and car payments. They literally owe easily $200,000 more than what they own. The bank foreclosed on their house and sold the house for $750,000; applying the $750,000 to their mortgage balance. Thankfully, the bank forgave the remaining $175,000 mortgage balance. How much income will Ted and Alice include in gross income this year as a result of the foreclosure and forgiveness of indebtedness?

Reference no: EM132894750

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