You will have income from debt relief (canceled debt) if you do not pay back the entire amount you borrowed. If this is not your principal residence this amount will be taxed as ordinary income, unless you meet an exception. The exceptions are that this is non-recourse debt, you are bankrupt, or you are insolvent.
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The short answer is that you will have income. However, if you are insolvent as determined under Section 108 of the Internal Revenue Code, then the forgiveness of indebtedness income will not create income for tax purposes.
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Since your debt is being forgiven, this is considered income to you. Since the debt is not related to your primary residence, but rather an investment property, the income will be taxable. There are exceptions in cases of insolvency, as my colleague pointed out, but it doesn't sound like you would meet that exception based on the limited facts you presented. You should consult with a tax attorney to review your situation.
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