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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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