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that point, it appears that American Express felt that further
collection actions would no longer be pursued, and a payment
agreement was worked out with petitioner through the efforts of a
collection agency employed by American Express. Petitioner paid
$15,000, and American Express relieved and released petitioner of
the balance due of $6,831.38. For the year 2002, American
Express issued Form 1099-C, Cancellation of Debt, for the
$6,831.38. Petitioners did not include the $6,831.38 as gross
income on their 2002 Federal income tax return. In the notice of
deficiency, the sole determination is that the $6,831.38
constitutes gross income.
From the record, it appears that the settlement between
petitioner and American Express came about by referral of the
account by American Express to a collection agency. Through the
efforts of the collection agency’s contacts with petitioner, the
settlement agreement was reached. After the $15,000 payment,
petitioner was of the impression, as he testified, that
“everything was over”, and contends he never received the Form
1099-C issued by American Express.
At trial, petitioner argued that the $21,831.38 was not the
correct amount of his indebtedness because it included erroneous
delinquency charges of $2,646.19; additionally, he had accrued
membership rewards points on his credit card, and that together,
the erroneous delinquency charges and the value of the membership
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