Cancellation of Indebtedness Income

Author: Jennifer Kowal

CPE Credit:  2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC

Debtors with cash flow issues who may be unable to pay their debts without accommodations from their lenders face numerous tax issues, and sometimes tax surprises, in the context of debt workouts and bankruptcy. Matters become more complicated in the context of LLC's, S-corporations and other passthrough entities.

This course addresses the creation and exclusion of cancellation of indebtedness income, consequences of debt workouts on LLC members, and tax attribute reduction.

Publication Date: February 2022

Designed For
Tax practitioners at all levels who provide advice and return preparation on debt modifications, debt workouts, and bankruptcies.

Topics Covered

  • Cancellation of indebtedness income
  • Exclusion of cancellation indebtedness income under section 108
  • Attribute reduction
  • TCJA updates

Learning Objectives

  • Recognize how to explain the difference in tax treatment between cancellation of recourse debt and foreclosures of property securing non-recourse debt
  • Identify situations when cancellation of indebtedness income may be excluded under section 108
  • Describe which types of debt modifications are treated as exchanges, and the tax consequences
  • Differentiate situations that would likely result in COD income and eligible for exclusion
  • Identify cases when discharged debt would not be limited for exclusion
  • Recognize conditions of insolvency exceptions
  • Identify when discharge of indebtedness is included in gross income
  • Identify which Section provides certain exclusions with respect to the discharge of indebtedness
  • Recognize the key Section 109 exceptions
  • Identify the qualified principal residence limitation


Instructional Method

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites

Advance Preparation

Registration Options
Regular Fee $62.00

 Chat — Books Support