<prompt> Human: My wifes whole life her father has claimed he will pay for her undergrad education. He has in fact boasted for years that he will put 3 of his kids thru college. The plan when we married was he was paying for undergrad. Anything after that was on us to pay. Fast forward 5 years post graduation and he still wasnt paying for it and kept deferring while she got her masters. Well finally, this year he says hes taking care of it. Come to find out he settled with Navient for 30k less. We got a 1099C cancellation of debt notice for the 30k. Did my taxes and we were set to get back 3600. Then i entered the 1099C and now we owe 6k to IRS. A difference of 9600 in tax liability!!!Is there anything i can do about this? Im not here to debate my FIL actions. Just wondering if i have no choice but to eat this bill?  <response>: You dont have a choice in whether the bill is paid. Who pays it is really more of a rrelationships question - if your relationship with FIL is such that you can say as a result of you settling this debt for less than what was owed we have a tax bill of 6k that is technically an expense of her undergraduate education, then I would think that would be your first option.If the relationship is not in a position where you can ask, or if you ask and he says no, then think of it as a 6k undergraduate degree which is just about as cheap as you can get. 