Big Hong Ng - Page 33

               Strong Hope had assets of $1,173,122 and liabilities of                
          $916,991 prior to its distribution of the Stockton Street property.         
          The Stockton Street property was valued at $1.1 million, and                
          according to Strong Hope's books it had other assets totaling               
          $73,122.  The company had a mortgage of $400,088 and owed $516,903          
          to Strong Hope Limited and Permanent Union Limited.  Based on these         
          facts, Strong Hope was not insolvent immediately prior to the               
          discharge of indebtedness.                                                  
               Strong Hope also contends that it did not liquidate in 1989,           
          and thus could not have discharge of indebtedness income.  We               
          disagree.  Following Strong Hope's distribution of its 50-percent           
          interest in the Stockton Street property to Ms. Ng on May 9, 1989,          
          it effectively ceased doing business and the amounts it owed to             
          Strong Hope Limited and Permanent Union Limited were effectively            
          discharged.  Whether a company actually liquidates is not the test          
          for determining whether there is income from discharge of                   
          indebtedness.  A debt is discharged when it becomes apparent that           
          the debt will never have to be repaid.  Brountas v. Commissioner,           
          74 T.C. 1062, 1074 (1980), vacated and remanded 692 F.2d 152 (1st           
          Cir. 1982).                                                                 
               Finally,  Strong  Hope  contends  that  any  discharge  of             
          indebtedness would not be U.S. source income under section 881(a)           
          or income effectively connected with the conduct of a trade or              
          business within the United States under section 882(a).  Again, we          
          do not accept this assertion.                                               

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