Which taxpayer is considered insolvent?

A taxpayer is considered insolvent when their total liabilities exceed their total assets. In this context, Maya has assets valued at $6,000 and liabilities of $7,000. This clearly indicates that her liabilities surpass her assets by $1,000, which means she is unable to meet her obligations in full.

Insolvency is often relevant for tax purposes, particularly in situations involving debt forgiveness, as it can affect the tax treatment of canceled debt.

In contrast, Elizabeth, who has no liabilities, and Gabe, who has neither assets nor liabilities, cannot be considered insolvent since they do not face a situation where their liabilities exceed their assets. Similarly, Alex, with assets equal to his liabilities, would be considered neither solvent nor insolvent, because insolvency requires that liabilities be greater than assets. Thus, Maya is the only taxpayer listed who fits the definition of insolvency.