Insolvency Worksheet

You do not include canceled debt in your income to the extent you are insolvent immediately before the cancellation. Insolvent immediately before the cancellation means: your liabilities exceed the FMV of your assets the day before the cancellation.

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IMPORTANT ADVICE: Keeping your Records for this worksheet could prove to be important. Print out & include any proof for the FMV of your assets (what you use to determine FMV) and the balances of your liabilities (Examples include: bank statements, online values, appraisals, balance sheets, etc.). You never know when the IRS is going to ask you to PROVE IT!!!

Part I: Total Liabilities the Day Before the Cancellation

Do not include the same liability in more than one category

Part II. Fair Market Value (FMV) of Assets Owned the Day Before the Cancellation

Assets include everything you own. Do not include the FMV of the same asset in more than one category

Insolvency