Question

Andrea owed $12,000 on a medical bill to University Hospital. The hospital agreed to discharge the debt due to Andrea's financial situation. Immediately prior to the discharge of the debt, Andrea's debts exceeded her assets by $5,000. How much of the debt forgiveness will Andrea need to include in her gross income?

Answer 1

Answer:

$7,000

Explanation:

Data provided in the question:

Amount owed by Andrea on a medical bill to university hospital = $12,000

Amount by  which the Andrea's debt exceeded her assets = $5,000

Now,

The debt forgiveness that Andrea will need to include in her gross income will be

= Amount owed on a medical bill - The amount by which debt exceeded assets

= $12,000 - $5,000

= $7,000