Eduardo and Ana Maria Own Their Home, Purchased in 2003

Eduardo and Ana Maria own their home, purchased in 2003 for $600,000. They financed the purchase with a mortgage for $550,000. In 2012 they bought a vacation cottage for $100,000, financed with a second mortgage of $95,000 on their home. In 2014, they fall upon hard times and cannot make the mortgage payments. The mortgage company sells their home for $425,000 and the cottage for $85,000. At the time of the sale, the mortgage balances are $450,000 on their home and $90,000 on their second mortgage. The mortgage company cancels the remaining debt. How much income do Eduardo and Ana Maria recognize on the cancellation of their debt?

A) $ -0-
B) $ 5,000
C) $15,000
D) $25,000
E) $30,000