Joseph B. Campbell - Page 22

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          Discharge of Indebtedness                                                   
               Gross income means all income from whatever source derived,            
          including income from discharge of indebtedness.  See sec.                  
          61(a)(12); sec. 1.61-12(a), Income Tax Regs.  Section                       
          108(a)(1)(C) excludes from gross income discharge of indebtedness           
          income if the indebtedness discharged is qualified farm                     
          indebtedness.  Petitioner bears the burden of proof with respect            
          to whether he is entitled to an exclusion.  See Rule 142(a);                
          Welch v. Helvering, 290 U.S. 111, 115 (1933).                               
               In order for income to be excluded under section                       
          108(a)(1)(C), petitioner must prove:  (1) The discharge was made            
          by a qualified person, see sec. 108(g)(1); (2) the indebtedness             
          was incurred directly in connection with the taxpayer’s operation           
          of the trade or business of farming, see sec. 108(g)(2)(A); and             
          (3) 50 percent or more of the taxpayer’s aggregate gross receipts           
          for the 3 taxable years preceding the taxable year in which the             
          discharge of such indebtedness occurs is attributable to the                
          trade or business of farming, see sec. 108(g)(2)(B).  The                   
          exclusion does not apply to a discharge to the extent the                   
          taxpayer is insolvent.  See sec. 108(a)(2)(B).  Exclusions from             
          taxable income should be construed narrowly, and taxpayers must             
          bring themselves within the clear scope of the exclusion.  See              
          Dobra v. Commissioner, 111 T.C. 339, 349 n.16 (1998) (citing                

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