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cancellation issue was considered in the light of the insolvency
exception. The Court there stated:
A major exception to this general rule of income
recognition upon debt cancellation is the insolvency
exception which petitioners seek to invoke. * * * The
insolvency exception applies only for cancellation of
indebtedness income. For all other types of income,
such as * * * gains from dealings in property, the
solvency of the taxpayer is irrelevant. [Id.,citations
omitted and emphasis added.]
In this case, the discharge of the indebtedness was effectively
given in exchange for the Exeter Street property. As a result,
as we indicated above, the transaction is treated as a sale, and
the gain is treated as capital gain, rather than discharge of
indebtedness income. OKC Corp. v. Commissioner, 82 T.C. 638, 648
(1984). There is no discharge of indebtedness income to be
excluded from gross income.
In any event, petitioner has failed to establish his
insolvency as required by section 108(a)(1)(B). Indeed the
record appears to establish otherwise. His bankruptcy petition,
filed December 12, 1991, after the Mortgage Discharge, indicates
that his assets were $3,434,500 in the aggregate, an amount far
in excess of his stated liabilities of $477,000. Section
108(a)(1)(B) accordingly is inapplicable here. Petitioner
argues, however, that among his non-exempt assets of $3,434,500
listed in his bankruptcy petition were claims against others that
were worthless and that in the aggregate accounted for the bulk
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