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e.g., Fifth Ave.-Fourteenth St. Corp. v. Commissioner, 147 F.2d
453, 457 (2d Cir. 1945); Dallas Transfer & Terminal Warehouse Co.
v. Commissioner, 70 F.2d 95, 96 (5th Cir. 1934); Mertens, Law of
Federal Income Taxation, sec. 11.42 (rev. 1990). Section 108
codified the judicially created insolvency exception as an
exclusion. Merkel v. Commissioner, 109 T.C. _____ (1997); Estate
of Delman v. Commissioner, 73 T.C. 15, 32 (1979). Section 108
was enacted by the Bankruptcy Tax Act of 1980, Pub. L. 96-589,
sec. 2, 94 Stat. 3389-3394; see also S. Rept. 96-1035, supra at
10, 1980-2 C.B. at 624. Section 108 was "intended to accommodate
both bankruptcy policy and tax policy." S. Rept. 96-1035, supra
at 10, 1980-2 C.B. at 624. The legislative history illustrates
that Congress did not want an insolvent or bankrupt debtor to be
"burdened with an immediate tax liability". Id. at 10, 1980-2
C.B. at 624. Also, Congress devised the statute to defer, and
eventually collect within a reasonable period, "tax on, ordinary
income realized from debt discharge." S. Rept. 96-1035, supra at
10, 1980-2 C.B. at 625. Thus, in effect, Congress established
the tax-deferral mechanism in section 108 so that the prospect of
immediate tax liability would not deter businesses from taking
advantage of opportunities to repurchase or liquidate their debts
at less than face value. H. Rept. 855, 76th Cong., 1st Sess. 5
(1939), 1939-2 C.B. 504, 507; S. Rept. 1631, 77th Cong. 2d Sess.
77-78 (1942), 1942-2 C.B. 504, 564. United States v. Centennial
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