The $ 50,000 in life insurance death benefits is generally tax free and you do not report it on your tax return. (paramountlifeinsurance.com)
That leaves $ 1,000 to be taxed at whatever rate would apply if this income were added to the income reported on your tax return. (fairmark.com)
The creditor will send you a 1099 - C, showing the amount of debt that was cancelled, and the cancelled amount is reported on your tax return as income. (nasonlawfirm.com)