Welcome to Just Answer,
Unfortunately there is taxable income
in the amount of box 2 $25,000. Because the Fair Market Value box 7 is the same of the cancellation, doesn't mean it isn't taxable. I hate to give you the bad news.
The good news is that there are certain times when you can exclude this from your income.
Canceled Debt that Qualifies for EXCEPTION to Inclusion in Gross Income:
- Amounts specifically excluded from income by law
such as gifts or bequests
- Cancellation of certain qualified student loans
- Canceled debt, that if paid by a cash basis taxpayer, would be deductible
- A qualified purchase price reduction given by a seller
- Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program
Canceled Debt that Qualifies for EXCLUSION from Gross Income:
- Debt canceled in a Title 11 bankruptcy case
- Debt canceled during insolvency
- Cancellation of qualified farm indebtedness
- Cancellation of qualified real property business indebtedness
- Cancellation of qualified principal residence indebtedness
I have provided more information in the link below.
Let me know if you have any questions before you rate my answer. A positive rating is what I strive for. Regards Dave