Roderick E. Carlson and Jeanette S. Carlson - Page 8




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          that foreclosure sale, petitioners were insolvent within the                
          meaning of section 108(d)(3).  The parties’ specific dispute here           
          concerns the meaning of the word “assets” as used in section                
          108(d)(3).                                                                  
               It is petitioners’ position that the word “assets” as used             
          in section 108(d)(3) does not include assets that are exempt from           
          the claims of creditors under applicable State law.  In support             
          of that argument, petitioners rely principally on Cole v. Commis-           
          sioner, 42 B.T.A. 1110 (1940), and Hunt v. Commissioner, T.C.               
          Memo. 1989-335.  According to petitioners, petitioners’ fishing             
          permit, which had a fair market value of $393,400 immediately               
          preceding the foreclosure sale on February 8, 1993, is an asset             
          exempt from the claims of creditors under the law of the State of           
          Alaska.5  Petitioners maintain that, pursuant to Cole and Hunt,             

               5Petitioners also contend that certain other assets, i.e.,             
          petitioners’ principal residence, petitioners’ household goods              
          and wearing apparel, petitioners’ tools of the trade, and peti-             
          tioners’ motor vehicle (collectively, petitioners’ other assets),           
          are assets exempt from the claims of creditors under applicable             
          State law to the extent of $54,000, $3,000, $2,800, and $3,000,             
          respectively.  According to petitioners, those assets also are              
          not to be included in petitioners’ assets in performing the                 
          calculation set forth in sec. 108(d)(3) for determining whether             
          petitioners are insolvent (insolvency calculation).  Assuming               
          arguendo that we were to hold that the word “assets” as used in             
          sec. 108(d)(3) does not include assets that are exempt from the             
          claims of creditors under applicable State law and that petition-           
          ers’ fishing permit is an asset that is exempt from the claims of           
          creditors under the law of the State of Alaska, petitioners would           
          be insolvent within the meaning of sec. 108(d)(3) without regard            
          to whether a total of $62,800 of petitioners’ other assets that             
          petitioners claim are exempt from the claims of creditors under             
                                                             (continued...)           





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