Your question is if my liabilities exceed my assets and a negative result occurs are you considered insolvent. The answer is yes, based on the IRS worksheet and your numbers. Life insurance would fall under the category of 'Other liabilities' on the worksheet.
- See IRS Publication 4681 for more information about insolvency. This is a worksheet that is prepared to determine if you can qualify for eliminating taxable income form a cancelled debt (Form 1099-C). Keep it with your tax files to show proof, as well as any other documentation to substantiate it, should you need it later.
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