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addition, the parties have stipulated that the “exposure of each
of petitioners Merkel and Hepburn” pursuant to petitioners'
guarantees and the State tax exposure was $1 million and
$490,000, respectively, and, “if the petitioners properly may
include the amount of their exposure under either * * *, the
petitioners were each insolvent to the extent of the full amount
of the * * * discharge of indebtedness income to each.”
Petitioners bear the burden of proof on all questions of fact.
Rule 142(a).
B. Arguments of the Parties
Respondent argues that the term “liabilities”, as used in
section 108(d)(3), “must be given its plain meaning” and
encompasses “only liabilities ripe and in existence on the
measurement date”. Respondent would have the Court find that
petitioners' guarantees were contingent liabilities and, thus,
not liabilities in existence on the measurement date for purposes
of section 108(d)(3). Respondent would have the Court also find
that, as of the measurement date, the State tax exposure was not
a liability for purposes of section 108(d)(3), contingent or
otherwise.
Petitioners argue that the plain meaning of the term
“liabilities” in section 108(d)(3) “includes all liabilities,
whether contingent or otherwise”, and “whether and how much of a
liability is counted must be determined on a liability-by-
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