NOTE DESTROYED – Cancellation of debt (COD) is taxable as ordinary income.

Generally, under Internal Revenue Code (IRC) § 61(a)(12) cancellation of debt (COD) is taxable as ordinary income.

However, under certain circumstances such income can be excluded under IRC § 108 where, the COD occurs as a result of a discharge in a title 11 bankruptcy case (IRC § 108(a)(1)(A)), where the discharge occurs when the taxpayer is insolvent (IRC § 108(a)(1)(B)), where the indebtedness discharged is qualified farm indebtedness (IRC § 108(a)(1)(C)), where the indebtedness discharged is qualified real property business indebtedness (IRC § 108(a)(1)(D)), or . . .

where the indebtedness discharged is qualified principal residence indebtedness which is discharged before January 1, 2013 (IRC § 108(a)(1)(E), the “2007 Mortgage Relief Act”).

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s