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A taxpayer is insolvent when his or her total liabilities exceed his or
her total assets.
The forgiven debt may be excluded as income under the "insolvency" exclusion.
Normally, a taxpayer is not required to include forgiven debts in income
to the extent that the taxpayer is insolvent. The forgiven debt may also qualify for exclusion if the debt was discharged
in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness.
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