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108 was amended by the Bankruptcy Tax Act of 1980, Pub. L. 96-
589, section 2(a), 94 Stat. 3389, to include a definition of
insolvency in section 108(d)(3). That section does not exclude
exempt assets from the definition of insolvent for purposes of
section 108. The amendments also added section 108(e)(1), which
provides that “Except as otherwise provided in this section,
there shall be no insolvency exception from the general rule that
gross income includes income from the discharge of indebtedness.”
In interpreting the amended statute, we noted in Carlson that
Hunt was inapplicable because it was decided before the effective
date of the amendments, and that section 108 as amended required
the opposite result from Hunt. Carlson v. Commissioner, supra at
99 n.7.
Concluding, we find that petitioners were not insolvent
within the meaning of section 108, either before or after their
debt was discharged. Consequently, we hold that the discharge of
indebtedness income, as determined by respondent, is includable
in petitioners’ gross income for 2003.
To reflect respondent’s concession with respect to the
section 6662(d) penalty,
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