Case: Bona Fide Debt Qualified Taxpayer for Insolvency Exception to Exclude COD Income (T.C. Memo) (IRC §108)

Taxpayer could exclude cancellation-of-indebtedness income under the insolvency exception in I.R.C. §108(a)(1)(B), the U.S. Tax Court held. Taxpayer proved that she was insolvent at the time of discharge based on her lease breach acceleration debt being a bona fide debt. The lease agreement terms, providing that the entire amount remaining was immediately due, were legally enforceable. The creditor did not need to bring legal action for the liability to be a bona fide debt. [White v. Commissioner, T.C. Memo 2023-77 (June 21, 2023)]