Sioana U. and S. Moli Ngatuvai - Page 8

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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               

               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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