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We agree with respondent that a debt is discharged when it
becomes clear that the debt will never have to be paid and that a
facts and circumstances analysis is applied to determine the
timing of the discharge. Cozzi v. Commissioner, supra at 445.
We do not agree, however, that respondent’s legal position was
reasonable on the basis of the facts and legal precedents which
formed the basis of that position.
We note, however, that respondent’s position in the instant
proceedings was not based on the absence of collection activities
by CareMatrix after 2000, the year in issue.6 The test for
determining the time of discharge requires a practical assessment
of the facts and circumstances relating to the likelihood of
repayment. Id. Facts and circumstances after 2000 were
unavailable for assessing the likelihood of repayment during
2000. Accordingly, in deciding whether respondent’s position was
substantially justified, we do not consider any acts or omissions
of CareMatrix after 2000, the year of the alleged discharge. See
Maggie Mgmt. Co. v. Commissioner, supra at 443.
Moreover, while respondent’s position at trial, as stated in
respondent’s trial memorandum, was that the liability was
6Specifically, respondent contends that the “passage of
nearly four years between the note’s maturity and the issuance of
the notice of deficiency, allowed the reasonable conclusion that,
at the time respondent filed his answer to the petition, there
was no ‘likelihood of payment’”. Below, we separately address
the absence of collection activities during 2000, the year in
issue.
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