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In 1996, on the dates set forth below, petitioners made the
following payments and the following portions of their credit
card loans were forgiven by the lenders.
Date Payments Discharge Total
MBNA Aug. 27 $1,300 $3,254 $4,554
MBNA Aug. 27 2,000 4,507 6,507
Barnett Bank N.A. Sept. 30 2,500 1,535 4,035
Nationsbank of
Delaware N.A. Oct. 29 3,605 4,642 8,247
Total of debts discharged $13,938
None of the aforementioned amounts included interest which
would have been deductible if paid. All of the debts that were
discharged were valid debts. Petitioners did not file for
bankruptcy in 1996. Petitioners did not include the $13,938 of
discharged debt in their gross income on their 1996 Federal
income tax return. Respondent determined that the income from
the discharge of petitioners' debts must be included in their
gross income because petitioners' creditors forgave the debts.
Based on the testimony and the exhibits presented at trial,
we find that petitioners had the following liabilities prior to
the discharge of the loans on August 27, 1996:
Fleet Mortgage $54,311
Nationsbank 8,247
MBNA America 4,554
MBNA America 6,507
Barnett Bank 4,035
Chemical Bank 9,238
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Last modified: May 25, 2011