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201, 88 Stat. 79, current version at 25 U.S.C. sec. 1481 (1994).
This payment satisfied the remaining original loan amount, paying
it in full.
Upon payment of petitioner's obligations, however, the BIA
assumed the rights of the debtors insured under the fund,
including the right to cancel as uncollectible any portion of
petitioner's obligations. See 25 U.S.C. sec. 1491 (1994).
Petitioner therefore received his discharge of indebtedness
income from the Bureau of Indian Affairs, Department of the
Interior, an instrumentality of the United States. See An Act to
provide for the appointment of a commissioner of Indian affairs,
and for other purposes, July 9, 1832, ch. 174, 4 Stat. 564
(1846), R.S. sec. 462, current version at 25 U.S.C. sec. 1
(1994).
Borrowed funds are not included in a taxpayer's income. Nor
are repayments of a loan deductible from income. When, however,
one's obligation to repay the funds is settled for less than the
amount of the loan, one ordinarily realizes income from discharge
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