These are the facts:

Horace White is one of the partners in Real Estate Endeavors, Ltd. Upon formation of the firm it needed a substantial amount of working capital. Thus, it applied to the Small Business Administration for a 50,000 loan. Since the firm then qualified under the SBA Minority Business Loan Program, the SBA loaned it $50,000 at 3%annual interest for a term of 10 years. The 3% rate was substantially below from the prevailing interest rate. In fact, over the 10 years term of the contract the firm saved at least $45,000 on the differential between the interest rate it had to pay and the interest rate it would have had to pay if the firm would have not qualified for such a loan. The firm used the $50,000 for its equity investment in a small apartment house which it constructed. The total construction cost of all the apartment was roughly $800,000and the remaining $750,000 needed was loaned to the firm by Equitable Life Insurance Company and secured by a first mortgage on the apartment house. After a year and half, it was finished a major earthquake occurred and substantially damaged the apartment house. The area was declared a disaster area by presidential proclamation which enable the SBA to make disaster loans for necessary repairs. The damages to the apartment house ran about $300,000 and the firm therefore apply for a casualty loan which was granted for a term of eight years at an interest rate of 10%. The firm reduced the casualty loss on its income tax return, thereby reducing its taxable income that year to an overall loss of $150,000.; Within the two years after the casualty a serious economic recession began, and, by Act of Congress, half of any casualty loan made by SBA was forgiven. At that point since the fir had made net after tax income of about 150,000 subsequent to the casualty loss it immediately paid off the remaining portion of the loan *150,000) because it felt the interest rate was too high.

Issue: Does REEL report gross income as a result of forgiveness of one-half of the casualty loan?