So the idea is the bank gave you a loan then forgave it, so it’s now income? That’s a big leap in logic and sounds evil considering you never consider that when getting a loan, you only expect the internet to accrue.

It is income. Someone gave you money. Otherwise, why wouldn’t a company “loan” you a higher salary and then just “forgive” the debt? Or, you could set up a company to loan yourself money — the company deducts the “loss” and you don’t pay taxes on the gain.

The principal is presumably income, however the interest or fees should not be. The IRS will even occasionally cancel debt that’s mostly fines and interest without considering it income.

Like all laws there should be some context. But I guess you’re right it’s an easy loophole to exploit and the simpler the tax law the better.