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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. EXCLUSION FROM GROSS INCOME FOR DIS-
CHARGE OF INDEBTEDNESS OF INDIVIDUALS. 
(a) IN GENERAL.—Paragraph (1) of section 108(a) 
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘or’’ at the end of subparagraph (D), by striking the 
period at the end of subparagraph (E) and inserting ‘‘, 
or’’, and by adding at the end the following new subpara-
graph: 
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‘‘(F) the indebtedness discharged is quali-
fied individual indebtedness.’’. 
(b) QUALIFIED INDIVIDUAL INDEBTEDNESS.—Sec-
tion 108 of such Code is amended by adding at the end 
the following new subsection: 
‘‘(j) SPECIAL RULES RELATING TO QUALIFIED INDI-
VIDUAL INDEBTEDNESS.— 
‘‘(1) QUALIFIED
INDIVIDUAL
INDEBTEDNESS 
DEFINED.—For purposes of this section, the term 
‘qualified individual indebtedness’ means any indebt-
edness of an individual other than indebtedness 
which is— 
‘‘(A) discharged on account of services per-
formed for the lender, or 
‘‘(B) held at any time by a person related 
to such individual. 
For purposes of subparagraph (B), a person shall be 
treated as related to another person if the relation-
ship between such persons would result in a dis-
allowance of losses under section 267 or 707(b). 
‘‘(2) DOLLAR
LIMITATION.—The amount of 
qualified individual indebtedness excluded from gross 
income under subsection (a)(1)(F) with respect to 
any individual for any taxable year shall not exceed 
the excess of— 
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‘‘(A) $10,000, over 
‘‘(B) the aggregate amount excluded from 
the gross income of such individual under sub-
section (a)(1) for such taxable year and all 
prior taxable years (determined without regard 
to the amount excluded under subsection 
(a)(1)(F) for such taxable year). 
‘‘(3) JOINT RETURNS.—In the case of a joint 
return— 
‘‘(A) the dollar limitation under paragraph 
(2) shall be applied separately to each spouse, 
and 
‘‘(B) the taxpayer may elect to treat any 
indebtedness of either spouse as indebtedness of 
the other spouse.’’. 
(c) COORDINATION.— 
(1) IN
GENERAL.—Paragraph (2) of section 
108(a) of such Code is amended by adding at the 
end the following new subparagraph: 
‘‘(D) PRECEDENCE
OF
INDIVIDUAL
IN-
DEBTEDNESS EXCLUSION.— 
‘‘(i) INDIVIDUAL INDEBTEDNESS EX-
CLUSION
TAKES
PRECEDENCE
OVER
IN-
SOLVENCY
EXCLUSION
UNLESS
ELECTED 
OTHERWISE.—Paragraph (1)(B) shall not 
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apply to a discharge to which paragraph 
(1)(F) applies unless the taxpayer elects to 
apply paragraph (1)(B) in lieu of para-
graph (1)(F). 
‘‘(ii) OTHER EXCLUSIONS TAKE PREC-
EDENCE.—Subparagraph (F) shall not 
apply to a discharge to which subpara-
graph (C), (D), or (E) applies.’’. 
(2) TITLE
EXCLUSION
TAKES
PRECE-
DENCE.—Subparagraph (A) of section 108(a)(2) of 
such Code is amended by striking ‘‘and (E)’’ and in-
serting ‘‘(E), and (F)’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to discharges of indebtedness after 
the date of the enactment of this Act. 
Æ 
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