-2-
amount of $26,676 for such year.1 Respondent reflected this
determination in a notice of deficiency dated October 13, 1993.
The principal unagreed item involves respondent’s
determination that petitioners realized forgiveness of indebtedness
income pursuant to section 61(a)(12) as a result of a $476,363
writeoff in 1990 of accounts that had been carried on the books of
petitioners’ wholly owned corporation (Land Air Delivery, Inc.)
essentially as shareholder loans. Also in dispute is the section
6662 accuracy-related penalty. The writeoff followed the
settlement of a tax examination for years 1982-84. In the
settlement, the parties agreed that petitioners’ withdrawals from
Land Air Delivery, Inc., should have been characterized, in part,
as dividends rather than shareholder loans. Petitioners maintain
that such withdrawals constitute dividend income in the year of
withdrawal, not 1990, and hence the writeoff in 1990 did not give
rise to a taxable event. Accordingly, the issues we must decide
are:
(1) Whether, as a result of the settlement agreement for
years 1982-84, respondent is estopped from asserting that the
corporate advances written off in 1990 were loans. We hold that
respondent is not.
(2) Whether petitioners realized discharge of indebtedness
1 Petitioners made income tax payments for 1990 totaling
$138,748 after filing their petition in this Court to stop the
accrual of interest.
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