12.3.5 Debt Cancellation as a Gift

Under I.R.C. § 102, a gratuitous release of a debt (something for nothing) may exclude debt cancellation from income. The issue is whether the creditor had a donative intent.1  Proving a §102 exclusion is difficult in consumer or commercial debt cases.

  • 1See Plotinsky v. Comm’r, T.C. Memo 2008-244.

Disclaimer: The articles in the Gillis Long Desk Manual do not contain any legal advice.