No. You have to understand the entire picture....
1) Debt. Simply, this is money or goods that you received in return for a promise to pay. That debt could have been used to purchase cars, boats, planes, houses, stereo, TV, etc., all are considered 'assets' and have a value. Now, if you don't pay off that debt, you have gained the asset 'for free'. And if you don't pay it off, the lender COULD submit a 1099-misc to report (to the IRS) that you 'earned' the unpaid balance. That would then be considered as 'income'.
2) Capital gains. The profit of the investment (property) is also considered income. As such, you cannot take 'income' and use it to offset another income (the unpaid debt), then say it was a level field. Simply doesn't work that way.
Example: You borrow $3000 and purchase a spa with it. Then, you refuse to repay the debt. The lender 'charges it off', sending you a 1099-misc to show that you have 'profited' $3000 from his write-off of the debt. The IRS sees that $3k as income (after all, you have the $3000 spa!). Later, you sell a stock that nets you $3,000 in capital gains profit. To the IRS, you have now gained a total of $6000 in 'income'. If you use the $3000 capital gain to pay the $3k debt, the 1099-misc income now drops to $0.00 (since it was repaid), making your net 'income' the $3000 in capital gains earned.... which is taxable.
