R. Edwin Brown and Winsome S. Brown - Page 13

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          Respondent has conceded this effect.  Therefore, we disagree with           
          petitioners that section 465 and the inclusion of the debt in               
          amount realized are mutually exclusive.                                     
               Moreover, we find no support in the record that respondent             
          and petitioners treated the debt as illusory.  In contrast,                 
          petitioners included the amount of the debt in their basis and              
          attempted to claim deductions relating thereto.  Similarly,                 
          respondent disallowed those deductions, not because the debt was            
          illusory, but rather because the section 465 at-risk rules                  
          applied.  Accordingly, we hold that petitioners must include in             
          their amount realized the amount of the FDC liability.                      
               Since we have granted respondent’s motion to increase the              
          deficiency, she has the burden of proving the increased amount.             
          In light of the debt service schedule reflecting a balance of               
          $1,540,280 as the principal balance of the FDC note on January 2,           
          1990, and since petitioners have not offered any evidence to the            
          contrary, we hold that respondent has met her burden of proof               
          with respect to the increased deficiency.                                   

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