I actually got to the bottom of it.  The two items I had questioned:  EIC and the Schedule SE not calculating because of non-deductible losses due to basis limitations were directly associated with each other.  Basically, I had to manually prepare the Schedule SE to remove the non-deductible losses (the software does not handle this automatically or correctly) and once I did this, the EIC calculated correctly.  So.... the cancellation of debt was not the factor for EIC not calculating it was the non-deductible losses.  Therefore, cancellation of debit is in deed NOT considered investment income as I had originally posted.  Warning to anyone dealing with non-deductible losses in relation to other self-employed earnings: You will have to prepare the Schedule SE manually or else it will interfere with the entire return calculations.