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respondent has raised a new issue. This argument has no merit.
Cancellation of indebtedness takes its tax significance from the
context in which it occurs; cancellation of indebtedness is just
a means by which a benefit can be conferred or a constructive
payment made. See OKC Corp. & Subs. v. Commissioner, 82 T.C.
638, 647-648 (1984). When a corporation with earnings and
profits cancels its shareholder’s debt to it, cancellation of
indebtedness is the means by which a constructive dividend
distribution to the shareholder can be accomplished. See Haber
v. Commissioner, supra; Schneller v. Commissioner, T.C. Memo.
1996-62, affd. without published opinion 129 F.3d 1265 (6th Cir.
1997); Estate of Shapiro v. Commissioner, T.C. Memo. 1987-126;
Shephard v. Commissioner, T.C. Memo. 1963-294, affd. per curiam
340 F. 2d 27 (6th Cir. 1965).
The notions of constructive dividend and cancellation of
indebtedness merge in their common elements: the conferring of
an economic benefit without expectation of repayment, which
constitutes the first prong of a constructive dividend, with the
existence of a debt and its discharge, see Waterhouse v.
Commissioner, T.C. Memo. 1994-467, which occurs when it becomes
clear that the debt will not have to be repaid, see Cozzi v.
Commissioner, 88 T.C. 435 (1987). The inquiry requires a
practical assessment of the facts relating to the likelihood of
repayment, see id., as they existed at the time the transaction
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