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C. Nonreceipt of Form 1099
Petitioners claim that because Ms. Yeager did not receive
the Form 1099-C, Ms. Yeager did not realize COD income. We
disagree. “The moment it becomes clear that a debt will never
have to be paid, such debt must be viewed as having been
discharged.” Cozzi v. Commissioner, 88 T.C. 435, 445 (1987).
The nonreceipt of a Form 1099 does not convert taxable income
into nontaxable income. Vaughan v. Commissioner, T.C. Memo.
1992-317, affd. without published opinion 15 F.3d 1095 (9th Cir.
1993).
Advanta prepared a Form 1099-C reporting May 17, 1995, as
the date it canceled Ms. Yeager’s indebtedness and $21,975 as the
amount of debt canceled. Accordingly, we hold that Ms. Yeager
realized the COD income in 1995.
D. Insolvency
Petitioners also claim that Ms. Yeager was insolvent when
Advanta forgave the debt. Petitioners assert that Ms. Yeager had
liabilities close to $32,000 from creditors’ claims (other than
Advanta) while at the same time she had no more than $1,000 in
assets and earned only $400 a month. Petitioners also argue that
they were not married at the time of the cancellation of
indebtedness; therefore, Mr. Rinehart’s assets are irrelevant in
determining whether Ms. Yeager was insolvent.
The Internal Revenue Code provides an exception to the
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