Where is the Wrights' cancellation of debt income reported on their tax return?

Cancellation of debt income, often referred to as COD income, must typically be reported on the taxpayer's Form 1040. When a debt is canceled or forgiven, it can result in taxable income, which taxpayers need to report accurately.

In this scenario, the correct reporting for cancellation of debt income is on line 21 of Form 1040. This line is designated specifically for reporting various types of income that do not fit into more explicitly categorized lines, including cancellation of debt income when it does not relate to a trade or business.

Using Schedule A for deductions or associating COD income with Form 4797 or Schedule D would not be appropriate for general cancellation of debt income reporting. Schedule A is intended for itemized deductions, while Form 4797 is used for property sales or exchanges and Schedule D is for capital gains or losses. Therefore, these alternatives do not align with the requirement to report the cancellation of debt income directly on Form 1040.