I 

111TH CONGRESS 

2D SESSION H. R. 4561 

To amend the Internal Revenue Code of 1986 to provide a limited exclusion 

from gross income for the discharge of indebtedness of individuals. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 2, 2010 

Mr. LEWIS of Georgia introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

a limited exclusion from gross income for the discharge 

of indebtedness of individuals. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. EXCLUSION FROM GROSS INCOME FOR DIS4 CHARGE OF INDEBTEDNESS OF INDIVIDUALS. 

5 (a) IN GENERAL.—Paragraph (1) of section 108(a) 

6 of the Internal Revenue Code of 1986 is amended by strik7 ing ‘‘or’’ at the end of subparagraph (D), by striking the 

8 period at the end of subparagraph (E) and inserting ‘‘, 

9 or’’, and by adding at the end the following new subpara10 graph: 


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1 ‘‘(F) the indebtedness discharged is quali2 fied individual indebtedness.’’. 

3 (b) QUALIFIED INDIVIDUAL INDEBTEDNESS.—Sec4 tion 108 of such Code is amended by adding at the end 

5 the following new subsection: 

6 ‘‘(j) SPECIAL RULES RELATING TO QUALIFIED INDI7 VIDUAL INDEBTEDNESS.— 

8 ‘‘(1) QUALIFIED INDIVIDUAL INDEBTEDNESS

9 DEFINED.—For purposes of this section, the term 

10 ‘qualified individual indebtedness’ means any indebt11 edness of an individual other than indebtedness 

12 which is— 

13 ‘‘(A) discharged on account of services per14 formed for the lender, or 

15 ‘‘(B) held at any time by a person related 

16 to such individual. 

17 For purposes of subparagraph (B), a person shall be 

18 treated as related to another person if the relation19 ship between such persons would result in a dis20 allowance of losses under section 267 or 707(b). 

21 ‘‘(2) DOLLAR LIMITATION.—The amount of 

22 qualified individual indebtedness excluded from gross 

23 income under subsection (a)(1)(F) with respect to 

24 any individual for any taxable year shall not exceed 

25 the excess of— 


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1 ‘‘(A) $10,000, over 

2 ‘‘(B) the aggregate amount excluded from 

3 the gross income of such individual under sub4 section (a)(1) for such taxable year and all 

5 prior taxable years (determined without regard 

6 to the amount excluded under subsection 

7 (a)(1)(F) for such taxable year). 

8 ‘‘(3) JOINT RETURNS.—In the case of a joint 

9 return— 

10 ‘‘(A) the dollar limitation under paragraph 

11 (2) shall be applied separately to each spouse, 

12 and 

13 ‘‘(B) the taxpayer may elect to treat any 

14 indebtedness of either spouse as indebtedness of 

15 the other spouse.’’. 

16 (c) COORDINATION.— 

17 (1) IN GENERAL.—Paragraph (2) of section 

18 108(a) of such Code is amended by adding at the 

19 end the following new subparagraph: 

20 ‘‘(D) PRECEDENCE OF INDIVIDUAL IN21 DEBTEDNESS EXCLUSION.— 

22 ‘‘(i) INDIVIDUAL INDEBTEDNESS EX23 CLUSION TAKES PRECEDENCE OVER IN24 SOLVENCY EXCLUSION UNLESS ELECTED

25 OTHERWISE.—Paragraph (1)(B) shall not 


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1 apply to a discharge to which paragraph 

2 (1)(F) applies unless the taxpayer elects to 

3 apply paragraph (1)(B) in lieu of para4 graph (1)(F). 

5 ‘‘(ii) OTHER EXCLUSIONS TAKE PREC6 EDENCE.—Subparagraph (F) shall not 

7 apply to a discharge to which subpara8 graph (C), (D), or (E) applies.’’. 

9 (2) TITLE 11 EXCLUSION TAKES PRECE10 DENCE.—Subparagraph (A) of section 108(a)(2) of 

11 such Code is amended by striking ‘‘and (E)’’ and in12 serting ‘‘(E), and (F)’’. 

13 (d) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to discharges of indebtedness after 

15 the date of the enactment of this Act. 

Æ 


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