Statement concerning the impact of transaction

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Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, but Sam is insolvent. Which of the following statements is correct concerning the impact of this transaction?

A) Both Bob and Sam recognize $8,000 of taxable income.

B) Bob recognizes $8,000 of taxable income.

C) Sam recognizes $8,000 of taxable income.

D) Neither Bob nor Sam has any taxable income from this transaction.

Reference no: EM13125012

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