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parties agreed to release all claims related to their
business relationship, and P agreed to pay I $25,000.
When the agreement was reached, M owed I $182,295.
Held: P did not realize cancellation of debt income on
account of the release.
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: James P. Whitmer petitioned the Court to
redetermine respondent’s determination with respect to his 1987
and 1988 Federal income taxes. For 1987, respondent determined a
$76,005 deficiency, a $3,800 addition to tax under section
6653(a)(1)(A), and a $19,001 addition to tax under section
6661(a). Respondent also determined that petitioner was liable
for an addition to tax under section 6653(a)(1)(B). For 1988,
respondent determined a $17,257 deficiency and a $4,314 addition
to tax under section 6661(a).
Following concessions, the only issue left for decision is
whether petitioner realized cancellation of debt (COD) income in
1987, on account of a settlement of a judicial proceeding in
which he was a party. We hold he did not. Unless otherwise
stated, section references are to the Internal Revenue Code in
effect for the years in issue. Rule references are to the Tax
Court Rules of Practice and Procedure. Dollar amounts are
rounded to the nearest dollar.
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Last modified: May 25, 2011