A taxpayer gets into rocky straits with their spouse and begins the process of filing for divorce, choosing to file separately for TY2023. The taxpayer initially begins as the sole owner of their shared residence. Part of the divorce process involves a discharge of the couple's mortgage debt after ownership is transferred from the taxpayer to the spouse in part to make them both joint owners of the property. The total amount of debt transferred to the spouse is $375,000. The total debt to eventually be discharged is $750,000. How much income will the taxpayer and spouse recognize, each, for the initial transfer of ownership interest and subsequent discharge?

Answer rating: 100% (QA)

When there is a discharge of indebtedness it is generally treated as income to the taxpayer unless a... View the full answer