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upon to pay an obligation claimed to be a liability for purposes
of the statutory insolvency calculation under the usual measure
of persuasion applicable in this Court.10 The usual measure of
persuasion required to prove a fact in this Court is
“preponderance of the evidence”, see, e.g., Schaffer v.
Commissioner, 779 F.2d 849, 858 (2d Cir. 1985), affg. in part and
remanding Mandina v. Commissioner, T.C. Memo. 1982-34, which
means that the proponent must prove that the fact is more
probable than not, see, e.g., 2 McCormick on Evidence, sec. 339,
at 439 (4th ed. 1992). Therefore, a taxpayer claiming the
benefit of the insolvency exclusion must prove (1) with respect
to any obligation claimed to be a liability, that, as of the
calculation date, it is more probable than not that he will be
called upon to pay that obligation in the amount claimed and
(2) that the total liabilities so proved exceed the fair market
value of his assets, see sec. 108(d)(3). See infra sec. II.C.7.
for further discussion relating to the measure of proof required
for an obligation claimed to be a liability for purposes of the
statutory insolvency calculation.
10 The terms of the agreement creating the claimed obligation
to pay generally would determine whether and in what amount the
taxpayer will be called upon to pay; e.g., with respect to
petitioners' guarantees, the likelihood of a bankruptcy event and
the amount that the bank would have the right to demand upon such
occurrence governs the analysis, see infra sec. II.D.2. We
acknowledge, however, that the examination in other contexts of
obligations claimed to be liabilities for purposes of the
statutory insolvency calculation may involve considerations not
addressed in this report.
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