Final answer:
It is true that individual taxpayers are not taxed on their cancellation of debt (COD) income if their debt was forgiven as part of bankruptcy proceedings, as this is provided for in United States tax laws under the 'Title 11' exception.
Step-by-step explanation:
The question is regarding the tax treatment of cancellation of debt (COD) income for individual taxpayers who have had their debts forgiven as part of bankruptcy proceedings.
The correct answer to this question is True. According to the United States tax law, specifically the Internal Revenue Code (IRC), when a debt is forgiven as part of a bankruptcy proceeding, the taxpayer is generally not required to include the forgiven debt in taxable income.
This is known as the 'Title 11' exception, referencing the title of the United States Code that covers bankruptcy. The rationale behind this rule is that the individual is already facing financial hardship, and the tax relief aims to aid them in their fresh start after bankruptcy.