Federal Tax Research 10th Edition by Roby Sawyers,William Raabe,Gerald Whittenburg,Steven Gill

Exercise 63

The downturn in the economy created great stress on the housing market and on homeowners. The federal government developed the Home Affordable Modification Program (HAMP) to help struggling homeowners. Under the plan, homeowners who make timely payments on their modified loans are eligible for Pay-for-Performance Success incentive payments, which are made on their behalf directly to their lenders. Homeowners can receive principal reductions of up to $1,000 per year for up to five years. Are these payments taxable to the homeowners