The IRS will want to add the forgiven debt to the kids taxable income.
My wife does this every year at the local middle school. She’s amazing.
No joke. I worked for a company that paid over a million in taxes because the IRS wanted to come after us for years worth of free services we had gotten, as perks. Rather than hit the morale, the company paid the taxes that we employees would have been responsible for. Naturally, the freebies came to a screeching halt . .