August 01, 2016 GPSolo | Best of ABA Sections

Tax Law: Cancellation of Debt and Related Transactions

The goal of this article is to set out the tax treatment of cancellation of debts, including the many exceptions that apply. The general rule is that the cancellation of a debt for less than adequate consideration causes the debtor to recognize ordinary income in the amount of debt that was forgiven. This doctrine is referred to by several terms that are used interchangeably—namely “cancellation of indebtedness or debt,” “discharge of debt,” and “forgiveness of debt.” In this article, the authors often refer to it as “cancellation of debt” or by its acronym “COD.”

Premium Content For:
  • Solo, Small Firm and General Practice Division
Join - Now