Mike is a college student who has big ideas but often fails to follow through on those ideas. Mikes parents have agreed to loan him money to pay for his tuition, books, and room and board. Mike is required to pay the money back to his parents, along with 6% interest, within six months of graduating. 2016 will be Mikes sixth year as a full-time student at TSU and his parents are concerned about Mikes lack of motivation to graduate and find a job. After his parents confront him about the issue, Mike admits that he has delayed graduating because he is afraid he will not be able to pay back the money his parents loaned him (which totals $70,000). Because Mikes parents love him and as an act of kindness to him, they tell Mike that if he graduates and pays them $10,000 they will forgive his debt to them and that he should not put off graduation any longer. Mike is so grateful for his parents generosity and promptly completes his general studies degree in two more semesters and pays them $10,000 at which time they give him a big hug and confirm that the debt is forgiven. At that time, Mike has no other debt and he has $70,000 of assets.

Assume that the total amount of debt Mike owed his parents was $70,000. Also, assume that the parents verbal statement of forgiving the debt is legally enforceable.

How much income (if any) must Mike report as a result of this transaction? Be sure to explain your answer and provide citations where relevant.