Question

All income from a canceled debt may be excluded from income if the taxpayer __________. Received...

All income from a canceled debt may be excluded from income if the taxpayer __________. 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. Had a debt of $8,750 canceled, and prior to the debt, they were insolvent by $7,500.

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Answer #1

Answer :

Had $12,500 of debt canceled, and prior to the cancellation, were insolvent by $13,000

Explanation :

A tax payer can exclude cancelled debt from income up to the amount that it is insolvent. In this case, prior to cancellation taxpayer is insolvent by higher amount than debt cancellation. therefore, all income from canceled debt may be excluded from income.

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