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Board began its analysis by acknowledging that under Lakeland
Grocery Co. v. Commissioner, 36 B.T.A. 289 (1937), the taxpayer,
a resident of New York, would realize income upon the discharge
of his indebtedness “to the extent of the excess of total assets
over total liabilities immediately after * * * [discharge].”
Cole v. Commissioner, supra at 1112. In determining whether
there was such an excess, the Board stated:
In determining the amount in [sic] which peti-
tioner’s net assets were increased as a result of the
cancellation of petitioner’s indebtedness by his credi-
tor, i.e., the amount of petitioner’s assets which
ceased to be offset by claims of creditors, there
should be, and has been, omitted from the value of
petitioner’s assets the value of his equity in ten life
insurance policies. * * *
7(...continued)
claims of creditors under applicable State law. We reject that
argument and petitioners’ characterization of Hunt as a case
decided under sec. 108(a)(1)(B). Hunt involved tax year 1980.
The insolvency exception in sec. 108(a)(1)(B) that was enacted
into the Code as part of the 1980 Bankruptcy Tax Act became
effective for transactions occurring after Dec. 31, 1980. See
1980 Bankruptcy Tax Act, Pub. L. 96-589, sec. 7(a)(1), 94 Stat.
3411. Although in certain circumstances Congress made available
to debtors in bankruptcy cases or similar judicial proceedings an
election to substitute Sept. 30, 1979, as the effective date of
the 1980 Bankruptcy Tax Act, see id. at sec. 7(f)(1), there is no
indication in Hunt that the taxpayers involved there made such an
election, see Hunt v. Commissioner, supra. Our discussion in
Hunt of sec. 108 as amended by the 1980 Bankruptcy Tax Act
(amended sec. 108) is dictum and appears in Hunt after we re-
solved the issue presented to us with respect to DOI income under
the tax law that was extant prior to the passage of the 1980
Bankruptcy Tax Act. See Hunt v. Commissioner, supra. In this
connection, it is noteworthy that we began our discussion of
amended sec. 108 in Hunt by stating: “Furthermore, the correct-
ness of our result is reinforced by the language of [amended]
section 108.” Id.
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