Legal Question in Tax Law in North Carolina

You need to see a CPA. Your post is somewhat unclear - can you or can't you use form 982? There are instructions and worksheets to help you do this but it would better if you saw a CPA. Since you do not own the home it should not be treated as your asset. Why would your wife be afraid of the IRS taking her furniture? What does this have to do with your inclusion or exclusion of the forgiven income?

If you file a joint return and it is determined, for whatever reason, that you erred and would have to pay added taxes, then you pay them. If your wife signs the return she may be liable for that as well unless she could seek relief under the innocent spouse exception.

If filing jointly works out better financially, then do it, but just make sure that the return is correct. There is no virtue in paying more than you legally should.