-32--32-
Irwindale MOA and the Irwindale MOA, by its own terms, did not
contemplate any type of financing other than general obligation
bonds, as shown by the negotiation problems that arose after the
legislation was passed. None of the alternative financing
proposals was acceptable to the parties.
Under the terms of the Irwindale MOA, Irwindale and the
Raiders pledged to work in good faith to overcome any third-party
obstacle. Although the Raiders and Irwindale continued to
negotiate toward an agreement, they were not bound by the terms
of the Irwindale MOA that could not at that time be legally
implemented. The Raiders were relieved of their obligation to
repay the initial $10-million advance in 1988 and thus must
recognize discharge of indebtedness income in that year.
Because we have determined that the Raiders had income
during 1988 resulting from discharge of indebtedness, we do not
address respondent’s alternative argument that petitioners had
income arising from the Raiders' being discharged of indebtedness
during 1989.
Bad Debt Deduction
Section 166(a) provides that a taxpayer may deduct any debt
that becomes wholly or partially worthless within the taxable
year. The parties do not dispute the existence of a bona fide
debt between the Raiders and Speck, but, instead, they disagree
as to whether any portion of the Speck debt became worthless
during 1986.
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