Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction?
a) Both Bob and Sam recognize $8,000 of taxable income.
b) Bob recognizes $8,000 of taxable income.
c) Sam recognizes $8,000 of taxable income.
d) Neither Bob nor Sam has any taxable income from this transaction.