Get the Skinny on Cancellation of Debt Income

A question I get all the time is, "if the bank gives me a modification that includes a reduction in principal, do I owe taxes on the amount forgiven?"  I am not a tax attorney, and am not providing tax advice here. However, in an unusually clear communication, the IRS has provided a nice summary in question-and-answer format about cancellation of debt income (and the exceptions) on their website here.