Is Investment Property Principal Paydown Considered taxable income?

[Mehran K.]

Hi all,

At my family party yesterday I had a chat with my uncle who owns an apartment building and is very successful in other businesses. He told me that any principal paydown on an investment property is considered taxable income because the amount payed down has gone from a liability to an asset. This is the first I've heard of this and it just doesn't sound right. I wanted to run it by some of you tax guys!

I know he owns the apartment building in an LLC and has other entities for his other businesses if that can factor in on this tax situation.

Thanks in Advance.