As tax season heats up, practitioners may discover that more clients have debt cancellation income than in past filing seasons. That is understandable. When the recession got into high gear in early 2009, many credit card lenders realized that some consumers were so overextended that they would never be able to pay the full amount of their debts. As a result, some lenders decided to take whatever they could get from these distressed borrowers and forgive the rest. In addition, as real estate prices soured, more and more lenders foreclosed on home loans or allowed borrowers to engage in short sales. All this has translated to more clients with debt cancellation income, which is taxable unless an exception or exclusion applies. Read more...