Lehman Brothers Financial SA (LEHNQ)

[zulual]

In Stevens v. Comm’r, T.C. Summary Opinion 2008-61 (T.C. 2008), the court stated that “26 U.S.C.S. § 108(a) provides that a taxpayer may exclude income from the discharge of indebtedness if the discharge occurs in a bankruptcy case, or when the taxpayer is insolvent, or if the indebtedness is qualified farm or business real estate debt.” Generally, a taxpayer should include income from the cancellation of debt. However, certain cancelled debts shall not be included in gross income. The exceptions are as follows:

If the cancellation of debt occurs in a bankruptcy case
When the taxpayer becomes insolvent
If the cancelled debt is a qualified farm indebtedness
If the cancelled debt is a qualified real estate business indebtedness