Question

has found it very difficult to repay her loans. because of these difficulties, the bank decided to forgive one of her most recent loans, an amount of $60,000. after the loan was discharged, deb had total assets of $321,000 and her remaining loans totaled $277,000. what amount must deb include in her gross income?

Answer 1

Deb must include the forgiven loan amount of $60,000 in her gross income, which would be subject to tax consideration based on IRS guidelines.

Step-by-step explanation:

The question pertains to the inclusion of forgiven debt in gross income. When a bank forgives a loan, the amount of the forgiven loan often must be included in the borrower's gross income, as it is considered a form of income by the IRS. In the provided scenario, the student, Deb, had a loan of $60,000 forgiven. After this loan discharge, Deb had total assets worth $321,000 and remaining loans that totaled $277,000. The amount that Deb must include in her gross income is the $60,000 of the forgiven loan, subject to the insolvency exclusion if at the time the debt was discharged, her liabilities exceeded her assets. It is important to consult a tax professional or refer to the IRS guidelines for specific circumstances that might affect this general rule.