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from earnings to Mrs. Harper’s commission account, the result was
that her existing account deficiency was eliminated, and her
obligation to pay back this amount was settled. This reduction,
referred to in income tax parlance as cancellation of
indebtedness, resulted in Mrs. Harper’s receipt of gross income
irrespective of the fact that, in her words, “she never received
an actual check for $1,113.17.” Diers v. Commissioner, supra.
At trial, petitioners stated that they refused to include
the amounts as listed on the aforementioned Form 1099 on their
return as they had not received any check for that amount from
Primerica during 2003. While we are sympathetic to petitioners’
confusion as to why they must include in their gross income
moneys that they actually did not “get a check for,” our review
of the entire record in this case, including the copious
statements of tax and accounting submitted by respondent as a
result of a subpoena served on Primerica, show that the amount in
issue was, in fact, applied to a then-existing deficiency in Mrs.
Harper’s chargeback account and when received was, based on the
reasons previously discussed, taxable.
This conclusion also comports with the explanation provided
in a letter sent by Primerica to respondent that is included as
part of the record. In that letter, Primerica explained that,
“In Mrs. Harper’s case, since income was applied to both negative
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