Deb has found it very difficult to repay her loans. Because of these difficulties, the bank decided to forgive one of her most recent loans, an amount of $45,000. After the loan was discharged, Deb had total assets of $232,000 and her remaining loans totaled $217,000. What amount must Deb include in her gross income?

Question

Quizplus · Accepted Answer

Deb's assets after the loan discharge were $232,000 and her remaining loans totaled $217,000, which means that her net worth was $15,000 ($232,000 - $217,000). Since the forgiven loan amount was $45,000, Deb's liabilities decreased by that amount, resulting in a net increase in her net worth to $60,000 ($15,000 + $45,000). However, the amount of debt forgiven is considered taxable income by the IRS, so Deb must include $15,000 ($60,000 - $45,000) in her gross income. Therefore, the correct answer is A) $15,000.

Deb Has Found It Very Difficult to Repay Her Loans