Sioana U. and S. Moli Ngatuvai - Page 4

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               In 1992, petitioners discontinued the farming operation and            
          moved to Utah.  Petitioners did not make any payments on the                
          loan.  On February 13, 1997, petitioners brought suit against the           
          USDA and other parties, claiming civil rights violations.  On               
          August 19, 1997, the United States District Court for the Central           
          District of Utah dismissed petitioners’ case against the USDA.              
               On October 4, 1999, the USDA brought a foreclosure action              
          against petitioners.  Petitioners’ farm was sold at a public                
          auction during February 2001, and the sale proceeds were applied            
          against the outstanding balance of the loan from the USDA.  The             
          proceeds nevertheless were insufficient to extinguish the loan.             
          During the 2001 taxable year, the USDA issued Forms 1099-C,                 
          Cancellation of Debt, regarding the remaining balance of the                
          loan.  Petitioners did not receive the Forms 1099-C.                        
               Petitioners own a home that they purchased in 1995 with a              
          $43,000 mortgage and that they estimate to be worth $60,000                 
          during the 2001 taxable year.  Petitioners also own a truck which           
          they purchased for $300; respondent concedes that this truck had            
          negligible value in 2001.  During the 2001 taxable year,                    
          petitioners owned stock that they purchased with a $15,000 loan.            
          Petitioners received a distribution of $3,930.14 from Wells Fargo           
          & Company during the 2001 taxable year.                                     
               Petitioners filed a Form 1040, U.S. Individual Income Tax              
          Return, for the 2001 taxable year.  They did not report any                 

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