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Tax Court Rules of Practice and Procedure. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority.
Respondent determined a $27,326 deficiency in petitioners’
2003 Federal income tax, as well as a penalty of $5,465 under
section 6662(d). Respondent subsequently conceded that the
section 6662(d) penalty was not applicable. Consequently, the
only issue remaining for decision is whether petitioners may
exclude the value of their residence, which is exempt property
for State bankruptcy law purposes, in determining whether they
were insolvent for purposes of section 108(a)(1)(B), pertaining
to exclusion from discharge of indebtedness income.
Background
This case was submitted fully stipulated, and the stipulated
facts are so found. The stipulation of facts and the attached
exhibits are incorporated herein by this reference. At the time
petitioners filed the petition, they resided in College Station,
Texas.
Beginning in 2001, petitioners encountered financial
difficulty stemming from an unrelated party’s default on an
unsecured loan of $100,000 made by petitioners in 2000. In
connection with such loan, petitioners incurred substantial
amounts of credit card debt, believing that they would be able to
repay their debts to the credit card companies when their debtor
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Last modified: May 25, 2011