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September 1997, no late fees are reflected on his account. The
annual rate at which finance charges were accrued dropped from
April 1997 through December 1997, according to MBNA’s records.
Apparently, some negotiations were going on during that time.
There is no indication that the settlement with MBNA was
based on petitioner’s inability to pay the amounts in dispute,
and he denies that he was insolvent at the time. The record
fully supports the inference that a dispute between petitioner
and MBNA existed and was carried on over many months. We accept
his testimony that he engaged in an ongoing dispute with MBNA
that ultimately induced MBNA to compromise petitioner’s account
for substantially less than the balance recorded in its
statements to petitioner.
As of June 1996, petitioner’s undisputed balance was
$28,837.61. His account increased by uncontested charges of
$1,200 for a cash advance and $10 for a cash advance fee. He
subsequently made nine payments totaling $4,250 and a settlement
payment of $12,700. The net uncontested, liquidated balance,
which we conclude should be the amount of petitioner’s
cancellation of indebtedness income, is $13,097.61.
Petitioner has made other arguments that have no merit. In
his trial memorandum, he suggested that the amount of
indebtedness canceled should be treated as “damages”. Respondent
infers that petitioner is suggesting that the reduction in his
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