Business equipment with a fair market value

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Reference no: EM131253562

Before any debt cancellation, KuhnCo holds business equipment with a fair market value of $1,000,000 and related liabilities of $1,250,000. The lender agrees to cancel $400,000 of the liabilities.

a) How much gross income does KuhnCo report as a result of the debt cancellation?

b) How would your answer change, if at all, had the lender cancelled $200,000 of the debt?

Reference no: EM131253562

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