Most lenders are not reporting unpaid balances as debt forgiveness to the IRS. There are laws prohibiting that if you sell before the end of next year. In Cal they even have a state law so no state income tax.
Don’t believe some anonymous guy on the internet. Search the net for debt forgiveness on loan balance or talk to your tax preparer.
Thought you’d might find this interesting about the debt cancellation.
http://homebuying.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=homebuying&cdn=homegarden&tm=30&f=00&tt=13&bt=1&bts=1&zu=http%3A//www.irs.gov/individuals/article/0%2C%2Cid%3D179414%2C00.html