- 11 -
Development, a corporation owned by INI’s shareholder, and not
INI, was indebted to Lender, the transferee.
The facts of this case are comparable to the salient facts
of INI, Inc. Mr. Friedland’s transfer of 6,842 shares of the
pledged stock was not in satisfaction of his own liability--CHC,
a corporation owned by petitioners’ son, and not Mr. Friedland,
was indebted to UNB, the transferee. Therefore, we hold that
petitioners did not have to include any part of the discharged
debt of CHC (i.e., the $2.6 million loan) in amount realized.
See INI, Inc. v. Commissioner, supra; see also Landreth v.
Commissioner, 50 T.C. 803, 812-813 (1968) (holding that a
guarantor of a loan does not recognize income when the lender
discharges the debtor from the loan).10
Accordingly, we do not sustain respondent’s determination
that Mr. Friedland had an amount realized on his transfer of the
10 The Court has stated:
Where a debtor is relieved of his obligation to repay
the loan, his net worth is increased over what it would
have been if the original transaction had never
occurred. This real increase in wealth may be properly
taxable. However, where the guarantor is relieved of
his contingent liability, either because of payment by
the debtor to the creditor or because of a release
given him by the creditor, no previously untaxed
accretion in assets thereby results in an increase in
net worth. * * *
Landreth v. Commissioner, 50 T.C. 803, 813 (1968) (citations
omitted). In the case at bar, petitioners had no untaxed
accretion in assets upon the transfer of the 6,842 shares of
pledged stock to UBI.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011