There are several exceptions and exclusions from the inclusion of canceled debt in income. The exceptions include:
The cancellation of a student loan for a student required to work for certain employers. See Cancellation of student loan in Publication 525, Taxable and Nontaxable Income.
The cancellation of debt that would have been deductible if paid.
The reduction of a debt by the seller of property if the debt arose from the purchase of the property.
The exclusions are discussed next.
- Exceptions and Exclusions
- Exclusions
- Basis Reduction
- Tax Attribute Reduction Example
Information courtesy of the Internal Revenue Service.
