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In return for 1000 mr hand cancels mr sandwichs debt of

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In return for $1,000, Mr. Hand cancels Mr. Sandwich's debt of $4,000. The cancellation is not a gift, and Mr. Sandwich is neither insolvent nor bankrupt. Which of the following statements is correct?

  • Mr. Hand has $1,000 taxable income.
  • Mr. Sandwich has $3,000 of taxable income.
  • Mr. Sandwich has $4,000 of taxable income.
  • Neither Mr. Hand nor Mr. Sandwich has any taxable income from this transaction.

Image text transcribed for accessibility In return for $1,000, Mr. Hand cancels Mr. Sandwich's debt of $4,000. The cancellation is not a gift, and Mr. Sandwich is neither insolvent nor bankrupt. Which of the following statements is correct?

Reference no: EM13586583

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