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holding in Carlson produces an anomalous result, in the light of
other provisions of section 108.
Section 108(a)(1)(A) provides that gross income does not
include “any amount which * * * would be includable in gross
income by reason of the discharge * * * of indebtedness * * * if
the discharge occurs in a title 11 case”. Therefore, petitioners
point out, under the Carlson rationale, a taxpayer who declares
bankruptcy would not be required to include discharge of
indebtedness in gross income, whereas a taxpayer seeking to pay
his debts and avoid bankruptcy would potentially find himself
burdened with additional tax as a consequence. Petitioners are
correct in this description of the statutory regime as determined
under Carlson. However, consistent with congressional purpose in
according a debtor coming out of bankruptcy a “fresh start” and
leaving him unburdened with an immediate tax liability, Carlson
v. Commissioner, supra at 95, we see nothing anomalous in a
statutory framework that simultaneously requires solvent
taxpayers, like petitioners, to pay taxes according to the usual
formula.3 Furthermore, not following our precedent in Carlson
would produce anomalous results.
3We note that sec. 108(a)(3) limits the amount of discharged
indebtedness that is excludable from gross income under the
insolvency provision to the amount by which the taxpayer is
insolvent. No such limitation applies when discharge occurs in a
title 11 case, such being another example of the statutory
framework that distinguishes between bankrupt and nonbankrupt
taxpayers.
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Last modified: May 25, 2011