gilbert AZ Accountant


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Sundin & Fish, PLC

Certified Public Accountants
2450 S. Gilbert Rd, Suite 100
Chandler, AZ 85286


Phone: 480-361-9400

Fax: 480-393-5609



How To Calculate Insolvency?

So the big question people have is – how do I calculate insolvency?

Many tax professionals who specialize in insolvency will have a standardized worksheet that will assist you in calculating insolvency.  I would encourage you to seek out these professionals and get any assistance possible.

Remember that insolvency is calculated just before the debt was forgiven.  So the first thing I suggest to people is to make a list of all the assets and liabilities they may have had at that point in time.  Of course you may have forgotten just when you bought a certain TV or when you paid off that credit card balance.  So you need to go back and review receipts and other support that you may have. 

Once you have a list make sure to review it closely to make sure that it is complete and you may want to have your spouse or another person close to you take a look at it.

Assets you have may include (but are not limited to) the following:

  • Cash and bank account balances
  • All real property (including land)
  • Cars and other vehicles
  • Boats and other watercraft
  • Household goods and furnishings
  • Appliances, computers, electronics, etc
  • Jewelry
  • Clothing & books
  • Stocks, bonds and mutual funds
  • Investments in coins, stamps, paintings, or other collectibles
  • Firearms, tools, sports, photographic, and other hobby equipment
  • Interests in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts)
  • Interests in education accounts and cash value of life insurance
  • Security deposits with landlords, utilities, etc.
  • Value of investment in a business (including interests in partnerships)
  • Other investments (for example, annuity contracts, guaranteed investment contracts, and commodity accounts)

Liabilities you have may include (but are not limited to) the following:

  • Credit card debt
  • Mortgage(s) on all real property including 1st and 2nd mortgages and home equity loans
  • Car and other vehicle loans
  • Medical bills
  • Student loans
  • Accrued or past due mortgage interest and/or real estate taxes
  • Accrued or past due utilities (water, gas, electric, etc.)
  • Federal or states income taxes remaining due (for prior tax years)
  • Loans from 401k accounts, other retirement plans and life insurance policies
  • Judgements
  • Business debts (including those owed as a sole proprietor or partner)
  • Margin debt on stocks and other debt to purchase or secured by investment assets other than real property
  • Other liabilities (debts) not included above

Remember that you the taxpayer are responsible for the proper valuations of assets and liabilities at the solvency date.  A CPA can assist you but he or she will not know everything about your financial situation.  It is also your responsibility to determine whether any outstanding indebtedness is recourse or non-recourse debt.  This can be difficult. 

You must use proper diligence in determining the amounts on the solvency calculation.  This includes proper support for the fair market valuations of assets and liabilities, which may include (but is not limited to) appraisals, independent valuations, market studies, account statements, etc.  You must retain any and all supporting documentation relating to the insolvency calculation.

Paul B. Sundin is an Arizona CPA.  He works with real estate investors as well as business owners.  Please see his website at  You can also contact him at 480-361-9400 or email him at