Cancellation of Debt Income: What is and What is Not
Taxpayers often associate tax liability with otherwise positive financial developments, such as the earning of wages or the realization of gain from the sale of property. But when taxpayers cannot pay their debts they may be surprised to learn that their financial stress id compounded by an additional tax liability. In this course you will learn the conceptual framework of cancellation of debt income, when it is and is not recognized in gross income, and the ancillary effects of excluding it from income. We will also explore reporting requirements, both for the taxpayer whose debt is cancelled and for a creditor who is cancelling the debt.
• When and why cancellation of debt (“COD”) results in income
• Circumstances under which COD may be excluded from income
• Situations where the taxpayer may get no notice of COD income and still be liable for the tax
• Obligations imposed on a creditor who cancels debt otherwise owed to them
• Recent cases involving COD income
Chuck Borek is a practicing attorney and founder of the Borek Group, LLC. Chuck is also a CPA, and his background includes five years as a partner in a public accounting firm. He received his law degree and MBA summa cum laude from the University of Baltimore in 1993, where he was editor-in-chief of the Law Review. He has been teaching professionally since 1989, including four years as an Associate Professor of Accounting and two years as a Visiting Assistant Professor of Law. He ha... View Full Profile