The IRS “What Ifs” for Struggling Taxpayers – Debt Related (B-3)

The IRS “What Ifs” for Struggling Taxpayers – Debt Related (B-3)
What if I am insolvent?
 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. If you believe you qualify
for any of these exceptions. The taxpayer uses Form 982 , Reduction of Tax Attributes
Due to Discharge of Indebtedness.
(IRS Web Site Updated 3/28/22) (TTT 07/19/22)