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further remaining debt discharge amount is disregarded, i.e.,
does not result in income or have other tax consequences.’”
This language of the legislative history evidences an intent
to preserve the notion of section 1.61-12(b), Income Tax Regs.:
“Income is not realized by a taxpayer * * * as the result of an
adjudication in bankruptcy, or by virtue of an agreement among
his creditors not consummated under any provision of the
Bankruptcy Act, if immediately thereafter the taxpayer’s
liabilities exceed the value of his assets”, at least to the
extent that there are no more tax attributes to adjust under
section 108(b).
I therefore join the majority in rejecting petitioner’s
argument that COD is one of the “items of income (including tax-
exempt income)” mentioned in section 1366(a)(1)(A) that is passed
through to the shareholder(s). In so doing, I disagree with
petitioner’s corollary conclusion that all items excluded from
gross income under sections 101 through 135 of the Code must be
treated as the same kind of “tax-exempt income” under section
1366(a)(1)(A).6
6 I agree with respondent’s argument that the location of
sec. 108 with other Code provisions, such as secs. 101 and 103,
in subtitle A, ch. 1, subch. B, part III, entitled “Items
Specifically Excluded From Gross Income”, does not require that
all such sections be treated in identical fashion for the
purposes of applying sec. 1366(a)(1)(A). See sec. 7806(b) (No
inference, implication, etc., as to legal effects to be drawn
from arrangement, classification, location, grouping, descriptive
(continued...)
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