Barry, a Solvent Individual but a Recovering Alcoholic, Embezzled $6,000

Multiple Choice

Barry, a solvent individual but a recovering alcoholic, embezzled $6,000 from his employer.In the same year that he embezzled the funds, his employer discovered the theft.His employer did not fire him and told him he did not have to repay the $6,000 if he would attend Alcoholics Anonymous.Barry met the conditions and his employer canceled the debt.

A) Barry did not realize any income because his employer made a gift to him.
B) Barry must include $6,000 in gross income from discharge of indebtedness.
C) Barry must include $6,000 in gross income under the tax benefit rule.
D) Barry may exclude the $6,000 from gross income because the debt never existed.
E) None of these.