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record dated September 26, 2001, indicates that a “1099-C” had
been sent to petitioner “approx. 01/1999 for tax year 1998”. As
of September 26, 2001, the records indicate the account balance
was $3,093.91, the amount “now due” was $0, and the “min pay” was
$3,093.91.
In response to petitioner’s inquiries, petitioner received a
letter regarding his account dated April 27, 2001. This letter
states that petitioner’s last payment had been in 1993, and that
“various collection attempts” had been made but had ceased in
1996. The letter further states that a Form 1099-C, Cancellation
of Debt, had been filed in 1999 for taxable year 1998 and had
been sent to petitioner’s former address in Philadelphia. During
1998, petitioner was never insolvent and never filed for
bankruptcy.
Petitioners filed a joint Federal income tax return for
taxable year 1998. They did not report any discharge of
indebtedness income. In the statutory notice of deficiency,
respondent determined that petitioners received $3,103 of such
income.
Gross income generally includes all income from whatever
source derived including income from discharge of indebtedness.
Sec. 61(a)(12). Debt is considered discharged the moment it is
clear that it will not be repaid. Cozzi v. Commissioner, 88 T.C.
435 (1987). Determining when this moment occurs requires an
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Last modified: May 25, 2011