-9-
* * * * * * *
(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
follows:
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
“liabilities”.
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
indebtedness.”
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.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011