H. Dee Johnson, Jr. and Mary L. Johnson, n.k.a. Mary L. Alphin - Page 3

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          to understanding our report.  Petitioners bear the burden of                
          proof.  See Rule 142(a)(1).1                                                
                                     Background                                       
               At the time the petition was filed, petitioners resided in             
          Dallas, Texas.                                                              
               On September 3, 1991, petitioner filed a voluntary petition            
          in bankruptcy (the bankruptcy petition) with the U.S. Bankruptcy            
          Court for the Eastern District of Texas (the bankruptcy court).             
          The bankruptcy petition was filed pursuant to chapter 7 of the              
          Bankruptcy Code (11 U.S.C.).  Upon the filing of the bankruptcy             
          petition, a taxable person separate from petitioner came into               
          existence; i.e., the bankruptcy estate (bankruptcy estate).  See            
          sec. 1398(a).  A trustee (the trustee) was appointed to represent           
          the bankruptcy estate.  Among the assets of the bankruptcy estate           
          were (1) a “$153,000 business debt” (the business debt), (2) real           
          property located in Argyle, Texas (the Argyle property), and (3)            
          real property located in Dallas, Texas (the Dallas property).               
          The business debt became worthless in 1991 after becoming an                
          asset of the estate.   Both the Argyle property and the Dallas              
          property (together, the properties) secured debts of petitioner             


               1  Sec. 7491, which, under certain circumstances, shifts the           
          burden of proof to the Commissioner, is inapplicable because the            
          examination in this case began before July 22, 1998, the                    
          effective date of that section.  See Internal Revenue Service               
          Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.                 
          3001(c), 112 Stat. 727.                                                     





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