Taxpayers must generally include income from the cancellation of debt in their total income, unless they qualify for an exception or exclusion. Exclusions must be applied in the following order:
Bankruptcy, insolvency, qualified farm indebtedness, qualified real property business debt, qualified principal residence indebtedness.
Bankruptcy, qualified real property business debt, qualified principal residence indebtedness, insolvency, qualified farm indebtedness.
Insolvency, qualified principal residence indebtedness, bankruptcy, qualified farm indebtedness, qualified real property business debt.
Insolvency, bankruptcy, qualified principal residence indebtedness, qualified real property business debt, qualified farm indebtedness.
