Cancellation of Debt (COD) Income - Exclusions

Exclusions

Not all COD income must be included in gross income. There are several exceptions:

• If the discharge of indebtedness occurs in a title 11 case
• If the discharge of indebtedness occurs when the taxpayer is insolvent
• If the indebtedness discharged is qualified farm indebtedness
• If the indebtedness discharged is qualified real property business indebtedness

In addition, the Code recognizes a Purchase Price Adjustment exception.

• Student loans forgiven for working for certain classes of employers are also excluded