Question

Which of the following taxpayers is insolvent? Elizabeth, who owns assets with a fair market value of $7,500 and has no liabilities. Gabe, who owns no assets, is unemployed, and has no liabilities. 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. OMark for follow up Question 7 of 75. Debt canceled in a personal bankruptcy is taxable as cancellation of debt income to what extent? All canceled debt, except for that related to real property, is taxable as cancellation of debt income. Unsecured debt that is canceled in bankruptcy is taxable as income. Only secured debt in excess of the fair market value of the collateral is taxable as income. Debt canceled in a bankruptcy proceeding under federal law is not taxable as cancellation of debt income. OMark for follow up Question 8 of 75. Canceled recourse debt is treated as income because X The taxpayer received the benefit of the use of the money but did not carry the burden of repayment. The taxpayer received the benefit of the use of the money but is not personally liable for recourse debt. Recourse debt is subject to discharge in bankruptcy. Recourse debt is not subject to discharge in bankruptcy.

Answer 1

Part 7

Answer is option A

A. All canceled debt, except for that related to real property is taxable as cancellation of debt income

All Canceled, forgiven, and discharged debt is included in the taxable income. However, if they qualify for any exclusion or exception. The Cancelation of qualified real property indebtedness is considered to be one of the exclusion to the taxable as cancellation of debt income.