Home Foreclosures: 10.7.4.4 Disputed or Contingent Debts
Debt that was never owed or for which repayment was contingent on some future event does not generate COD income upon discharge. For example, the release of a guarantor does not generate COD income to the guarantor.512 Similarly, if a statute voids the debt, the IRS will generally permit the discharge of that debt to be excluded from income.513 Thus, the reduction in principal due to a successful Truth in Lending rescission claim should not be included in income.