<prompt> Human: My wife got a letter in the mail after not paying one of her student loans. She owed approximately 45k. They said she could settle the account for 18k if she paid it all at once. My father lent us the money to pay it. When we had our taxes done they said we would owe about 6,000. Im confused at best. Is this counting the loan from my father as income To my understanding it shouldnt. If they offered a deal to pay less why are we being penalized for it? Any advice welcome!Assistant: Thank you for the responses! So the 6k is tax on the 27k of income. I wish I had known that when we paid the initial 18k. Thank you all again for helping me wrap my brain around this.  <response>: If you can show the IRS that you were insolvent at the time, youll be good to go. 