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case”. Section 108(d)(2) provides that the term “title 11 case”
means “a case under title 11 of the United States Code (relating
to bankruptcy), but only if the taxpayer is under the
jurisdiction of the court in such case and the discharge of
indebtedness is granted by the court or is pursuant to a plan
approved by the court.” Section 108(b) provides that the amount
excluded from gross income under section 108(a)(1) must be
applied to reduce certain tax attributes of the taxpayer,
including any NOL of the taxpayer for the taxable year of the
discharge and any NOL carryover to that year.
The parties are in agreement that the business debt became
worthless in the hands of the trustee, producing a deductible
loss of $153,000. They are in disagreement as to the amount of
petitioner’s debt discharged by operation of the discharge order.
Petitioner appears to argue that, because the trustee’s final
report (accepted by the bankruptcy court) does not list the CMI
debts as claims against the bankruptcy estate, those debts were
not discharged. Respondent disagrees. On that point--whether,
by the discharge order, petitioner was discharged from the CMI
debts--we agree with respondent. Petitioner misunderstands the
bankruptcy law.
The CMI debts are not listed in the trustee’s final report
because CMI did not file proofs of claim with respect thereto. A
proof of claim is the mechanism by which a creditor seeks
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Last modified: May 25, 2011