General Information

Course Description

Debt cancellation has become an increasingly common situation, especially during periods of economic hardship. When a creditor forgives a debt, the effect is not solely financial: specific and complex tax consequences can arise that require careful analysis prior to preparing the tax return.

This course develops the fundamental rules that determine when cancellation of debt income—technically known as COD income—must be included in gross income and when it may be excluded from the tax burden. The material thoroughly examines bankruptcy and insolvency exclusions, farm indebtedness, qualified real property business debt, certain student loans, and rules applicable to principal residences.

It also addresses the calculation of recognized income, the reduction of tax attributes, the critical difference between recourse and nonrecourse debt, guarantees and related parties, and the application of these rules to S Corporations and Partnerships, along with formal reporting requirements using Form 982, Form 1099-C, and Form 1099-A.

Course Objective

Equip the participant to properly identify, calculate, exclude, and report cancellation of debt income (COD income), applying the technical provisions of Internal Revenue Code Sections 61 and 108, available legal exclusions, tax attribute reduction, and specialized rules for individuals, S Corporations, and Partnerships.

Specific Objectives

• Recognize when a canceled debt generates taxable cancellation of debt income (COD income).
• Identify statutory exclusions available under the Code Section 108 framework.
• Accurately calculate insolvency status and determine the exact amount qualifying for exclusion.
• Properly complete Form 982 and apply regulatory steps for tax attribute reduction.
• Clearly distinguish the distinct tax consequences of recourse versus nonrecourse debt.
• Apply specific COD income rules in the taxation of S Corporations and Partnerships.
• Correctly interpret and report information reported on Form 1099-C and Form 1099-A.

Who Should Take This Course

• Tax preparers serving clients with canceled debt, foreclosures, or abandoned properties.
• Certified public accountants and tax advisors who need to evaluate and confidently apply Code Section 108 exclusions.
• Corporate professionals working with S Corporations, Partnerships, or commercial real estate transactions.
• Tax specialists seeking to strengthen skills in insolvency analysis, Form 982 filing, and attribute reduction.
• Students of U.S. federal taxation who wish to master complex rules regarding cancellation of debt income.

Course Content – 4 Modules

What You Will Achieve Upon Completion

• Accurately determine when debt cancellation constitutes taxable income and calculate its exact amount.
• Evaluate the technical viability of bankruptcy, insolvency, and other Code Section 108 exclusions.
• Properly document assets, liabilities, and fair market values to substantiate an insolvency exclusion case before the IRS.
• Confidently distinguish between recourse and nonrecourse debt treatments in cancellation, foreclosure, and abandonment processes.
• Correctly complete Form 982 following statutory ordering rules for tax attribute reduction.
• Properly interpret Form 1099-C and Form 1099-A information returns and reflect their tax return impact.
• Apply COD income rules with technical expertise across individual, S Corporation, and Partnership tax returns.

Included Materials

• Academy textbook: Debt Cancellation.
• Official IRS forms included: Form 982, Form 1099-C, Form 1099-A, and related technical schedules.
• IRS Publication 4681 and relevant statutory provisions of the Internal Revenue Code.
• Analytical summaries of court cases and guided practical COD income examples.
• Virtual lecture slides, review questions, and comprehensive case studies.
• Structured insolvency worksheet and balance sheet template.
• Real-world foreclosure examples, debt restructuring agreements, and attribute reduction matrices.

Assessment

Frequently Asked Questions