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H.R. 3768: th Emergence Katrinay Tax Relief Act of 2005 , Record No.: RS22269. Date: September 19, 2005 1 (September 19, 2005)

handle is hein.tera/crstax0095 and id is 1 raw text is: Order Code RS22269 September 19, 2005 CRS Report for Congress Received through the CRS Web H.R. 3768: the Katrina Emergency Tax Relief Act of 2005 Erika Lunder Legislative Attorney American Law Division Summary On September 15, 2005, the House and Senate passed different versions of a bill that contains tax provisions intended to assist the victims of Hurricane Katrina. H.R. 3768, the Katrina Emergency Tax Relief Act of 2005, was passed by voice vote in the House, while the Senate passed an amended version by unanimous consent. This report compares the House and Senate versions of the bill. It will be updated as events warrant. This report compares the provisions in H.R. 3768, the Katrina Emergency Tax Relief Act of 2005, as passed by the House with those in the amended version of the bill that was passed by the Senate. The version passed by the House will be referred to as H.R. 3768, while the version passed by the Senate will be referred to as S.Amdt. 1728. The provisions are grouped by topic and not discussed in the section order found in the House or Senate version of the bill. Discharge of indebtedness. When all or part of a debt is forgiven, the amount of the cancellation is ordinarily included in the income of the taxpayer receiving the benefit of the discharge.' This rule is based on the idea that the taxpayer has been enriched from not having to pay a debt that he or she was legally obligated to pay. There are currently several exceptions to the general rule that a cancelled debt is included in taxable income in the year of discharge. For example, no amount of the discharge is included in income if the cancellation is intended to be a gift or is from the discharge of student loans for the performance of qualifying services.2 There are also certain situations in which the taxpayer may defer taxation, with the possibility of permanent exclusion, on income from the discharge of indebtedness, such as if discharge occurs when the debtor is in title 11 bankruptcy proceedings or insolvent.3 1 IRC § 61(a)(12). 2 IRC §§ 102 and 108. 3 IRC § 108(a). Congressional Research Service • -The Library of Congress

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