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An element necessary for the existence of COD income under
section 61(a)(12) is that the taxpayer was, in fact, discharged
from a liability. Whether a debt has been discharged is
dependent upon the substance of the transaction. Cozzi v.
Commissioner, 88 T.C. 435, 445 (1987). A debt is considered to
be discharged at the point when it becomes clear that the debt
will never have to be paid. Id. The test for determining when
the required identifiable event occurred is a practical
assessment of all the facts and circumstances surrounding the
likelihood of repayment of the debt. Id. Any identifiable event
that fixes with certainty the amount to be discharged may be
taken into consideration. Id. (citing United States v. S.S.
White Dental Manufacturing Co., 274 U.S. 398 (1927)); 2925
Briarpark, Ltd. v. Commissioner, T.C. Memo. 1997-298.
The existence of an almost imperceptible possibility that a
debt may be collected at some indefinite future point does not
preclude the recognition of COD income. Exchange Sec. Bank v.
United States, 492 F.2d 1096, 1099 (5th Cir. 1974); 2925
Briarpark, Ltd. v. Commissioner, supra; cf. Fidelity-Philadelphia
Trust Co. v. Commissioner, 23 T.C. 527, 531 (1954). Simply
because a creditor has failed to remove a debt from its books
does not signify that the debt has not been canceled. Exchange
Sec. Bank v. United States, supra.
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