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1263, 1265 (1939); Exchange Sec. Bank v. United States, 345 F.
Supp. 486, 490-491 (N.D. Ala. 1972), revd. on other grounds 492
F.2d 1096 (5th Cir. 1974); see also Colonial Sav. Association v.
Commissioner, 85 T.C. 855, 862-863 (1985), affd. 854 F.2d 1001
(7th Cir. 1988). Settlement in such circumstances does not
occasion a freeing of assets and accession to income. N. Sobel,
Inc. v. Commissioner, supra at 1265. Petitioner bears the burden
of showing that the settlement with Caesar’s did not result in
income from the cancellation of indebtedness. Rule 142(a).
Petitioner, relying on Zarin v. Commissioner, 916 F.2d 110
(3d Cir. 1990), revg. 92 T.C. 1084 (1989), claims that he
disputed his debt to Caesar’s, that his payments to Caesar’s were
in settlement of the dispute, and that therefore he realized no
income upon the cancellation of the $255,000 that Caesar’s
claimed it was owed by petitioner.2 Petitioner bases his
argument upon certain facts alleged by him which respondent
1(...continued)
1096 (1989), revd. 916 F.2d 110 (3d Cir. 1990), or whether the
rule also applies where there is a dispute as to a debt’s
enforceability, Zarin v. Commissioner, 916 F.2d at 115-116. We
need not address that question, however, because we hold below
that petitioner has not carried his burden of proving that there
was a dispute as to either the amount or the enforceability of
his debt to Caesar’s.
2
Petitioner does not argue that the settlement constituted a
purchase price adjustment pursuant to sec. 108(e)(5). In Zarin
v. Commissioner, 916 F.2d at 1097-1100, we concluded that sec.
108(e)(5) was inapplicable to the settlement of gambling debts,
and that conclusion was not disturbed or criticized by the Court
of Appeals for the Third Circuit.
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