In these troubled economic times, many financially distressed borrowers have had some or all of their debt cancelled or forgiven by their lender last year. While that was no doubt welcome relief to the people who received it, they may not have realized that the amount of the forgiven debt may have to be included in income.

However, not all canceled debts trigger taxable income. And, even if there is no exception or exclusion in a particular case, the tax bite may be reduced or eliminated if you can show that the amount reported by the lender is incorrect.