I would consult an attorney or CPA.
If this was a renegotiation of the contract, I would say no forgiveness of debt. But if there was a legal obligation and they just said that's "OK", then maybe forgiveness of debt.
Probably need more details from the contract and how it was decided to pay 10K instead of 50K.
**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**
