In which case will the taxpayer be able to exclude all income from their canceled debt? The taxpayer: Had a debt of $9,600 canceled. Immediately prior to the cancellation, they were insolvent by $6,800. Had a debt of $8,200 canceled. Immediately prior to the cancellation, they were insolvent by $8,000. Had a debt of $7,500 canceled. Immediately prior to the cancellation, they were insolvent by $8,500. Had a debt of $9,850 canceled. Immediately prior to the cancellation, they were insolvent by $8,850.