Dudley B. and La Donna K. Merkel - Page 9

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                    (3) Insolvency exclusion limited to amount of                     
               insolvency.--In the case of a discharge to which                       
               paragraph (1)(B) applies, the amount excluded under                    
               paragraph (1)(B) shall not exceed the amount by which                  
               the taxpayer is insolvent.                                             
               The term “insolvent” is defined in section 108(d)(3) as                
               For purposes of this section, the term “insolvent”                     
               means the excess of liabilities over the fair market                   
               value of assets.  With respect to any discharge,                       
               whether or not the taxpayer is insolvent, and the                      
               amount by which the taxpayer is insolvent, shall be                    
               determined on the basis of the taxpayer's assets and                   
               liabilities immediately before the discharge.                          
          Section 108 contains no definition of the term “liabilities”, nor           
          does the Code contain any generally applicable definition of that           
          term.  The regulations interpreting section 108 neither add to              
          the statutory definition of insolvency nor define the term                  
               Section 108(e)(1) states that, except as provided in section           
          108, “there shall be no insolvency exception from the general               
          rule that gross income includes income from the discharge of                
               B.  Extrinsic Sources                                                  
                    1.  Introduction                                                  
               This Court's function in the interpretation of the Code is             
          to construe the statutory language so as to give effect to the              
          intent of Congress.  See United States v. American Trucking                 
          Associations, 310 U.S. 534, 542 (1940); Fehlhaber v.                        

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