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2. Account 790
Mr. De Shon contends that they did not receive a discharge
of indebtedness because they were not liable for the amount
allegedly discharged. In the alternative, Mr. De Shon contends
that the discharge of indebtedness did not occur in 2001.
Respondent, on the other hand, contends that petitioners received
discharge of indebtedness income as reported on the Form 1099-C.
We need not address Mr. De Shon’s first contention because we
decide this issue on the basis of Mr. De Shon’s alternative
contention.
Having observed Mr. De Shon’s appearance and demeanor at
trial, we find his testimony to be honest, sincere, and credible.
On the basis of the entirety of the record, we do not find that
issuance of the Form 1099-C was the identifiable event
establishing when Discover discharged petitioners’ debt. In
light of the facts and circumstances in the instant case, we find
that Discover’s cessation of debt collection activity in 1999 was
the identifiable event fixing the loss with certainty. See Cozzi
v. Commissioner, supra at 445.
Petitioners filed their first dispute with Discover in
September 1998 and again in October and November 1998. The only
response petitioners received was a collection letter dated
December 12, 1998. The collection letter indicated that
Discover’s department manager would determine the handling of
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