Enrolled Agent Exam [Part 1] 71, Cancellation of Debt Income

This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: • That cancelled debt is generally taxable income reported on Form 1099-C, but exam questions focus on the exceptions. • The insolvency exclusion is strictly limited to the amount by which total liabilities exceed the FMV of total assets immediately before the debt cancellation. • Debt discharged in a Title 11 bankruptcy case is always fully excluded from income, regardless of the taxpayer's solvency. • Excluding COD income under most exceptions requires a reduction of tax attributes on Form 982 in a specific, testable order. • Qualified Principal Residence Indebtedness exclusion requires a direct reduction to the basis of the home, not the standard attribute reduction order. For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or Youtube Channel: https://www.youtube.com/@Open-exam-prep