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of the parties’ positions that we find to have no merit, we make
the following findings regarding petitioners’ financial status
immediately before the discharge: (1) The fair market value of
the property subject to the foreclosure proceeding was $90,000
(per stipulation of the parties); (2) petitioners had other
assets totaling $43,715 (per stipulation of the parties); (3)
petitioners’ liability to Countrywide was not less than $143,280
(per stipulation of the parties); and (4) petitioners’ other
liabilities totaled not more than $12,224.79 (liabilities
substantiated per stipulation of the parties). Plugging these
amounts into the equation contemplated by the statute, we find,
as respondent acknowledges in his brief, that immediately before
the discharge, petitioners’ liabilities exceeded their assets by
$21,790.59, and therefore, within the meaning of section
108(a)(1)(B), petitioners were insolvent to that extent for
purposes of section 108.
Section 108(a)(3) limits the exclusion provided in section
108(a)(1)(B) to the “amount by which the taxpayer is insolvent.”
Applying the $21,790.59 exclusion against the $22,035 discharged
results in $244.41 that is includable in petitioners’ 2002
income as a result of the discharge of their indebtedness to
Countrywide.
Respondent imposed a section 6662(a) accuracy-related
penalty upon the ground that the underpayment of tax required to
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