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excluded from his gross income because the discharge occurred
when he was forced into early retirement by "city and state
government representatives [who] illegally and unjustly inter-
fered in * * * [his] career as a teacher".
Where a recourse mortgage has been discharged, cancellation
of indebtedness income arises to the extent the amount of the
debt exceeds the fair market value of the property. See Gehl v.
Commissioner, 102 T.C. 784, 786 (1994), affd. without published
opinion 50 F.3d 12 (8th Cir. 1995); Bialock v. Commissioner, 35
T.C. 649, 660 (1961); sec. 1.1001-2(c), Example (8), Income Tax
Regs. Based on all the surrounding facts and circumstances, a
debt is considered discharged the moment it becomes clear that it
will never be repaid. See Cozzi v. Commissioner, 88 T.C. 435,
445 (1987).
Respondent argues that, in 1994, when petitioner was dis-
charged from having to pay the balance due on foreclosure, he
realized cancellation of indebtedness income. Petitioner makes
no argument to the contrary. For example, he presents no
evidence suggesting that the unpaid recourse liability survives
as a legally enforceable obligation against him or, alterna-
tively, that he had no obligation to repay the loan initially
advanced by PNC. Moreover, petitioner does not dispute that, if
the indebtedness is found to be taxable, the amount includable is
$31,525, the difference between the outstanding loan and the
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