When Rick Found Out That Ryan's Liabilities Exceeded His Assets

question 29

True/False

When Rick found out that Ryan's liabilities exceeded his assets by $15,000, he forgave Ryan the $1,000 he owed Rick in hoping that Ryan might get back on his feet. Ryan is allowed to exclude the $1,000 from income.

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Definitions:

Taxable Income

The portion of an individual's or corporation's income that is subject to taxes by the government.

Tax Schedule

A chart or formula that outlines the rate of taxation applied to various levels of income or profits.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, reflecting the percentage of tax applied to your income for each tax bracket in which you qualify.

Average Tax Rate

The portion of total income that is paid as taxes, calculated by dividing the total amount of taxes paid by the taxpayer's total income.