Yes, the debt cancelled would be included in the liabilities to determine your insolvency.
When you prepare the Massachusetts return in TurboTax, the federal income will be used as your Massachusetts income starting point. So, you will start out with the debt forgiven.
I suggest you work through the program and see if there is any mention of adjusting the federal income for the debt forgiven. In other words, follow the instructions in the state program and you should come up with the correct result.
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