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however, that those amounts were not discharged. To the
contrary, 11 U.S.C. section 727(b) (2000) provides that, with
exceptions not here relevant, the effect of a discharge by a
bankruptcy court is to discharge the debtor “from all debts that
arose before the date of the order for relief under this chapter
* * * whether or not a proof of claim based on any such debt * *
* is filed under section 501 of this title”. Accordingly,
notwithstanding their omission from the trustee’s final report,
the CMI debts were discharged, giving rise to excludable
discharge of indebtedness income in the amount of the CMI
deficiencies ($197,500). See sec. 108(a)(1)(A).
Petitioners concede that, if respondent prevails (i.e., if
excludable income from discharge of indebtedness was realized on
account of petitioner’s discharge from the CMI debts), “$153,000
of * * * [the NOL] deduction [claimed on petitioners’ 1994 income
tax return] is eliminated under Section 108(b), and Petitioner’s
[sic] income tax return must be adjusted accordingly.” As
contemplated by petitioners, respondent has prevailed. We
therefore conclude that petitioners concede the correctness of
respondent’s adjustments eliminating from petitioners’ returns
for the audit years the claimed $153,000 NOL carryover resulting
from the worthlessness of the business debt. We shall not
disturb respondent’s adjustment on account thereof.
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Last modified: May 25, 2011