Taxpayer wins

A retired police officer received a monthly pension. During the year in question, $448,671 of his mortgage debt was canceled. He excluded most of the amount from income under the tax code’s insolvency exception. The IRS said the pension plan should be counted when determining whether he was insolvent. However, the U.S. Tax Court sided with the taxpayer, stating that the plan wasn’t an asset because it couldn’t be used to pay the tax on cancellation of debt income immediately. For example, he couldn’t convert it to cash. (TC Memo 2017-32)