- 7 -
1(a), Income Tax Regs. Nor does the record indicate that peti-
tioners included that award in their gross income for any other
year.6 Therefore, petitioners are not entitled for 1991 to a
nonbusiness bad debt deduction under section 166(d)(1)(B) with
respect to the punitive damages that were awarded to, but not
collected by, petitioner during that year. Accordingly, respon-
dent's determinations are sustained.7
To reflect the foregoing,
Decision will be entered
for respondent.
6 Consequently, petitioners did not have any basis in the
punitive damages at issue. "[T]he process of establishing a
basis for an income item consists, in effect, of reporting it in
the taxpayer's gross income for tax purposes." O'Meara v.
Commissioner, 8 T.C. 622, 633 (1947).
7 See supra note 2.
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