Edward B. Rood - Page 9

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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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