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Vito is having financial difficulties. Among other debts, he owes More Bank $300,000. Rather than lend Vito more money to help him out, More Bank agrees to reduce his debt to $200,000.
a. How much gross income must Vito recognize if his assets total $600,000 and his liabilities are $400,000 before the forgiveness of debt?
b. Assume the same facts as in part a, except that Vito's liabilities are $800,000 before the forgiveness of debt.
c. Assume the same facts as in part a, except that Vito's total liabilities are $625,000 before the forgiveness of debt.
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