Dudley B. and La Donna K. Merkel - Page 20

               Congress has not specified the minimum level of certainty,             
          but Congress’ indicated purpose of not burdening an insolvent               
          debtor outside of bankruptcy with an immediate tax liability, see           
          supra sec. II.B.2., together with the operation of the insolvency           
          exclusion and its limitation under section 108(a)(3), in                    
          accordance with the statutory insolvency calculation, suggest               
          that Congress intended to make a debtor’s ability to pay an                 
          immediate tax on income from discharge of indebtedness the                  
          controlling factor in determining whether a tax burden is                   
          imposed.9  Indeed, if a debtor has the ability to pay an                    
          immediate tax, in the sense that assets of the debtor exceed                
          liabilities that he will be called upon to pay (and not in the              
          sense that the debtor simply has assets on hand), the concern of            
          imposing an unfair or unwarranted immediate tax burden vanishes.            
               Ability to pay an immediate tax (i.e., the statutory notion            
          of insolvency) is a question of fact and, although Congress has             
          specifically instructed us that (in determining ability to pay)             
          assets are to be valued at fair market value, see sec. 108(d)(3),           
          Congress has not otherwise instructed us on how to make that                
          finding or what measure of persuasion carries the burden of                 
          proof.  A taxpayer with the burden of proof must, thus, persuade            
          us of whether and in what amount he (as debtor) will be called              

          9    The Commissioner apparently agrees.  See Rev. Rul. 92-53,              
          1992-2 C.B. 48, 49 (when a taxpayer’s liabilities exceed the fair           
          market value of his assets, “the taxpayer is unable to pay either           
          the indebtedness or the tax”).                                              

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