Second Circuit Upholds Dismissal of Tax Refund Claim over Debt Cancellation Timing
Salta v. United States, No. 24-2700-cv, 2025 BL 357998 (2d Cir. Oct. 06, 2025), Court Opinion
On October 6, 2025, the U.S. Court of Appeals for the Second Circuit affirmed the Southern District of New York’s summary judgment for the United States in Salta v. United States.
The court held that Romeo Salta, Jr. and Phyllis Polega could not recover $113,087 in taxes paid on cancellation-of-indebtedness income from a 2015 mortgage discharge.
The appellate panel agreed that the debt was discharged in 2015—not 2017—and that the taxpayers were barred from raising new arguments under the variance doctrine.
Why It Matters
The decision reinforces the rule that cancellation-of-debt income is recognized when the debt is clearly discharged and confirms that taxpayers must present all refund arguments to the IRS before bringing them to court.
Key Facts
Parties: Romeo Salta, Jr. and Phyllis Polega (plaintiffs-appellants) v. United States (defendant-appellee).
Court: U.S. Court of Appeals for the Second Circuit.
Lower Court: Southern District of New York (Willis, M.J.).
Issue: Whether cancellation-o…
