Cancellation of Indebtedness Income

===========Question: We have recently had our bankruptcy discharged. We are giving back the house, will the discharged debt be considered income? If so how are we supposed to be able to pay those taxes when we are broke?thanks,Josh
===========Reply: Normally, Cancellation of Indebtedness is considered Taxable Income. The exception is if the taxpayer is bankrupt or insolvent. Since you filed a Chapter 7 Bankruptcy Liquidation, you will not be taxed on the COD income. If you have any further tax questions, please check my website http://www.taxesq.com/

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