1. No taxable income is recognized from cancellation of debt in which instance?
The taxpayer was solvent prior to the debt cancellation.
The debt was recourse debt.
The canceled debt was for the taxpayer's second home.
The debt cancellation was intended as a gift.
2. Choose the correct answer to complete the following sentence. Income from cancellation of debt:
Is only excluded from income if the buyer is insolvent.
Is not excludable from income if the buyer is insolvent.
May be excluded to the extent the buyer has negative net worth.
Is taxable to the extent that the buyer has negative net worth