- 4 -
petitioners, the company was precluded under State law from
collecting that amount. As evidenced in a Form 1099-C,
Cancellation of Debt, issued to petitioners by Countrywide,
$22,035 of the debt originating from the loan was forgiven during
2002.
Immediately preceding the foreclosure of the mortgage,
petitioners had assets totaling $133,715 and liabilities
totaling $155,505.59.3
Petitioners did not include any amount of cancellation of
indebtedness income on their 2002 return. In the notice of
deficiency respondent increased petitioners’ income by the amount
reported as cancellation of indebtedness on the Form 1099-C.
Other adjustments made in the notice of deficiency have been
agreed to by the parties.
Discussion
In general, the term “income” as used in the Internal
Revenue Code means income from any source, including income from
the discharge of indebtedness. Sec. 61(a)(12); Commissioner v.
Glenshaw Glass Co., 348 U.S. 426 (1955). In this case, during
the year in issue, Countrywide forgave $22,035 of the debt owed
to it by petitioners as a result of the loan. According to
respondent, that amount is includable in petitioners’ 2002
3 The stipulated amount shown for assets includes the value
of the residence at $90,000.
Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: March 27, 2008