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Laws ch. 183, sec. 54 (Law Co-op. 1991). The difficulty with
petitioner's position is that there was nevertheless a valid
cancellation of petitioner's debt by the FDIC on November 12,
1991, which was plainly binding between the parties and on anyone
having notice even prior to recordation. No Massachusetts
authority to the contrary has been called to our attention. We
hold that petitioner has shown no error in the Commissioner's
determination as to the gain realized on the property.
Petitioner contends, however, that section 108 requires
exclusion of the gain from gross income. Section 108(a)(1)(B)
provides that "Gross income does not include any amount which
* * * would be includible in gross income by reason of the
discharge (in whole or part) of indebtedness of the taxpayer if
* * * the discharge occurs when the taxpayer is insolvent". The
argument may be superficially appealing until critically
examined. Apart from petitioner's failure to establish
insolvency, as shown hereinafter, the point is fundamentally
defective.
The $447,133 capital gain realized by petitioner upon
cancellation of his $3,600,000 mortgage obligations was not
discharge of indebtedness income. Section 108(a) applies only
where there is cancellation of indebtedness income. See Estate
of Delman v. Commissioner, 73 T.C. 15, 32 (1979), where the debt
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