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under section 108(g)(2)(B). While the record is not clear as to
the exact date of discharge and can be characterized as
incomplete, we are convinced that the preceding facts found by us
are sufficient for us to conclude that petitioners were solvent
at the time the USDA loan was discharged. Their assets in 2001
included stock of approximately $15,000, a home estimated to be
worth $60,000, a truck of negligible value, and moneys from wages
and distributions in excess of $30,000. In comparison, their
liabilities in 2001 included the outstanding debt from their
mortgage of $43,000, the excess nonrecourse debt of $30,714 from
the USDA loan, and the $15,000 loan used to buy stock. We
sustain respondent’s determination that petitioners must include
$30,714 in their gross income for 2001, such amount representing
the portion of the loan discharged by the USDA.4
Reviewed and adopted as the report of the Small Tax Case
Division.
4 “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); see also Rinehart
v. Commissioner, T.C. Memo. 2002-71. The fact that a taxpayer
did not receive a Form 1099 does not convert taxable income into
nontaxable income. Vaughn v. Commissioner, T.C. Memo. 1992-317,
affd. without published opinion 15 F.3d 1095 (9th Cir. 1993).
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