<p>Sec. 108 Income from discharge of indebtedness</p>

Sec. 108 Income from discharge of indebtedness

<p>26 U.S.C. section 108, Income from discharge of indebtedness. Under IRC section 108, a taxpayer’s cancellation of debt is included in gross income unless specific exceptions apply, such as when the debt is discharged in a bankruptcy case or when the taxpayer is insolvent. According to section 108(e)(2), taxpayers don’t recognize income from the discharge of indebtedness if the interest payment of the liability would have given rise to a deduction. For some income exclusions, the taxpayer must reduce specified tax attributes — including net operating losses, capital loss carryovers, and basis reductions — following prescribed ordering rules.</p>

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Sec. 108 Income from discharge of indebtedness