Question

U Alex, who owns assets with a fair market value of $12,000, has liabilities of $12,000, and retired last year. Maya, who owns assets with a fair market value of $6,000 and has total liabilities of $7,000. Mark for follow up Question 4 of 75. All income from a canceled debt may be excluded from income if the taxpayer O Received a Form 1099-C with $18.400 in box 2 and $16,700 in box 7, and they were insolvent by $2,900. Had a debt of $5,400 canceled, and prior to the debt, they were insolvent by $2,750. Had $12,500 of debt canceled, and prior to the cancellation, they were insolvent by $13,000. O Had a debt of $8,750 canceled, and prior to the debt, they were insolvent by $7,500.

Answer 1

Option , had $12500 of debt canceled, and prior to the cancellation, they were insolvent by $13000

Reason: A debt canceled is excluded from gross income if the insolvency is higher than the debt canceled.