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1971); Cascade Milling & Elevator Co. v. Commissioner, 25 B.T.A.
946 (1932), respondent conceded that the COD income from the
discharge of the three mortgages (Countrywide Home Loans,
Superior Federal Bank, and Washington Mutual) identified in the
notice of deficiency qualified under the exception to COD income
provided in section 108(a)(1)(B) because petitioners were
insolvent on the dates those mortgages were discharged. The new
adjustment claimed by respondent to be COD income is $62,707,
while the three mortgages respondent treated in the notice of
deficiency as giving rise to COD income totaled $253,456.
Therefore, since there is no assertion of an overall increase in
deficiency, this case does not fall under section 6214. However,
by claiming that an amount arising from a different mortgage is
COD income, respondent has raised a new matter and therefore
under our Rules has the burden of proof in regard to that claim.
B. Burden of Proof
Gross income includes income from the cancellation of
indebtedness. Sec. 61(a)(12). However, an exception to the
inclusion of COD income in gross income is provided for taxpayers
who are insolvent at the time of cancellation of indebtedness.
Sec. 108(a)(1)(B). The determination of insolvency is based on
the taxpayer’s liabilities and assets immediately before the
discharge of debt. Sec. 108(d)(3). Petitioners claim that they
were insolvent on the calculation date. Normally, the burden of
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