Garry D. Acuncius and Danalene L. Acuncius - Page 4

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               Prior to 1997, BankTEXAS made efforts to collect the loan              
          from petitioners by renewing the note several times, making the             
          repayment structure easier, collecting interest only, and                   
          unsuccessfully attempting to collect the collateral.  On April              
          20, 1997, BankTEXAS deemed the loan to be uncollectible and                 
          discharged the loan in the amount of $32,000 and $14,395 in                 
          accrued interest.  Thereafter, BankTEXAS reported the debt                  
          forgiven to the Internal Revenue Service on a Form 1099-C for               
               During 1997, Mrs. Acuncius was an art teacher in a public              
          school and Mr. Acuncius was a horse trainer.  In addition, Mrs.             
          Acuncius pursued a Master’s degree in education, and Mr. Acuncius           
          pursued a Master’s degree in agricultural development in the hope           
          of increasing their earning potential and obtaining better jobs.            
          In 1997, petitioners owned the following assets:                            
                Asset                                 Value                           
               Livestock                          Less than $5,000                    
               1979 Jeep                          500                                 
               1986 Ford truck                    500                                 
               Household goods                    1,000 to 1,500                      
               Jewelry                            Less than 1,000                     
          In 1997, petitioners owed the following liabilities:                        
               Liability                                         Amount               
               BankTEXAS loan                     $32,000                             
               Accrued interest on loan                14,396                         
               Teaching certification                  4,000                          
               Master’s degree student loan:  Mrs. Acuncius      8,751                
               Master’s degree student loan:  Mr. Acuncius       17,269               
               1991 Income taxes                       700                            

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