Question

After completing medical school, Dr. Kim had $200,000 in student loan debt. Be fulfilled an obligation as part of his student loan contract to work as a doctor for four years on an Indian reservation. At the end of the four years, all his student loan debt was cancelled. Dr. Kim will need to report what amount of income on his tax return in the year the debt was forgiven

Answer 1

$50,000

Step-by-step explanation:

The initial balance of Dr. Kim's student loan debt was $200,000 and it was completely repaid after working for 4 years, therefore, Dr. Kim must report annual income of $200,000 / 4 = $50,000 during each of the 4 years that he worked on an Indian reservation. He didn't actually receive any money, but since his liabilities decrease, he must report it as income.