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discharge occurs when the taxpayer is insolvent. To claim the
benefit of the insolvency exclusion, the taxpayer:
must prove (1) with respect to any obligation claimed to be
a liability, that, as of the calculation date, it is more
probable than not that he will be called upon to pay that
obligation in the amount claimed and (2) that the total
liabilities so proved exceed the fair market value of his
assets.
Merkel v. Commissioner, 109 T.C. 463, 484 (1997), affd. 192 F.3d
844 (9th Cir. 1999).
Petitioner claims that he was insolvent “by at least two to
three million dollars” in 1993 when his debts to Bonnevista and
Castle Towers were discharged. In support of this contention,
petitioner relies on the vague and conclusory testimony of
himself and his accountant. Petitioner has failed to provide any
details, however, as to either the specific liabilities he claims
to have owed or the fair market value of his assets in 1993. His
testimony in this regard is contradicted by his admission in the
CIS, which he signed on March 3, 1993, representing that he had a
positive net worth of approximately $389,650--an amount that
appears to have been understated by at least the value of his
ownership interests in Fantastic Foods and his $457,072
receivable from Fantastic Food (Delaware), as reported on that
entity’s 1992 Federal corporate income tax return. We conclude
and hold that petitioners have failed to establish that they
qualify for the insolvency exception under section 108(a)(1)(B).
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