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provision of the Bankruptcy Act, if immediately thereafter, the
taxpayer's liabilities exceed the value of his assets."
Section 1.61-12(b), Income Tax Regs., adopted by T.D. 6272,
1957-2 C.B. 18, 31, restates the pre-section 108 judicially
created insolvency exception. See, e.g., Estate of Delman v.
Commissioner, 73 T.C. 15, 32 (1979). Section 108 codified the
insolvency exception as an exclusion from gross income.
Bankruptcy Tax Act of 1980, Pub. L. 96-589, sec. 2, 94 Stat.
3389. Section 108(e)(1) provides that "there shall be no
insolvency exception from the general rule that gross income
includes income from the discharge of indebtedness", except as
provided in section 108. Thus, section 108, not section 1.61-
12(b), Income Tax Regs., controls in these cases.
Respondent would have us treat differently the operation of
sections 61(a)(12) and 108 and, for example, sections 61(a)(4)
and 103 (relating to interest) or sections 61(a)(10) and 101
(relating to insurance). Respondent argues that, as an
illustration, death benefits are first realized under section
61(a)(10) and then certain death benefits are excluded, i.e., not
recognized, by section 101. Respondent argues that no such
realization occurs in the case of discharge of indebtedness.
Section 61 requires that certain amounts be included in
income, i.e., items of income. Specifically, section 61(a)(12)
requires that income from discharge of indebtedness be included
in gross income. Absent any exclusionary provision, items of
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