Step 1: Acetamide reacts with bromine and KOH in the Hofmann bromamide degradation reaction. Bromine first reacts with KOH to form KOBr, which brominates the amide nitrogen.
\[ CH_3CONH_2 + Br_2 + KOH \rightarrow CH_3CONHBr + KBr + H_2O \]
Step 2: The N-bromoamide loses a proton to a second equivalent of KOH, giving an anion.
\[ CH_3CONHBr + KOH \rightarrow CH_3CONBr^- + K^+ + H_2O \]
Step 3: This anion undergoes alpha-elimination, expelling a bromide ion and generating an electron-deficient nitrogen species called an acyl nitrene.
\[ CH_3CONBr^- \rightarrow CH_3CON: + Br^- \]
Step 4: The nitrene is unstable and rearranges immediately, with the methyl group migrating from carbon to nitrogen, forming an isocyanate.
\[ CH_3CON: \rightarrow CH_3N=C=O \]
Step 5: The isocyanate hydrolyzes in the basic medium to give a primary amine with loss of carbon dioxide as carbonate.
\[ CH_3N=C=O + 2KOH \rightarrow CH_3NH_2 + K_2CO_3 \]
The key intermediate formed during this degradation is the nitrene.
\[\boxed{\text{Nitrene}}\]