James P. Whitmer - Page 11

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          petitioner intended as Midwest’s sole shareholder to derive some            
          benefit from the arrangement with ITT.  The hard fact remains,              
          however, that the commissions and the loan proceeds that were the           
          subject of the debt went to Midwest, and they did not go into               
          petitioner’s pocket.  ITT’s forgiveness of its debt to Midwest              
          also did not increase petitioner’s net worth.  It merely                    
          prevented petitioner’s net worth from being decreased.  Landreth            
          v. Commissioner, 50 T.C. 803, 812-813 (1968).                               
               Under the facts at hand, we hold that petitioner did not               
          realize COD income on account of the Release.  In so holding, we            
          have considered all arguments made by respondent for a contrary             
          holding and, to the extent not discussed above, have found them             
          to be without merit.7                                                       
               To reflect the foregoing,                                              
                                                       Decision will be               
                                                  entered under Rule 155.             


               7 As an alternative to her main argument, respondent argues            
          that petitioner received taxable damage income paid through a               
          discharge of indebtedness in 1987.  According to respondent,                
          petitioner's liability under his guarantee was reduced by                   
          nonexcludable amounts that he was entitled to receive on account            
          of the Defendants' Counterclaim in the ITT litigation.                      
          Petitioner has moved the Court to place the burden of proof on              
          respondent, with respect to this argument.  For reasons similar             
          to above, we reject respondent’s alternative argument.  We shall            
          deem petitioner’s motion to be moot.                                        








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