Income From Debt Relief



A partnership has $1 million in unpaid trade accounts payable and no
assets, with judgements against it by the vendors for the $1 million
of trade ap. The partnership is winding up and preparing its final

When the partnership reports the $1 million of income out to its
partners on final K-1s, are there cases where the income can be
reported as a type of income the partner can get out of reporting as
taxable, by inciting the "insolvent outside of bankruptcy" exception
to recognizing income from debt relief?


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