-48-
business in 1991.27 Respondent bears the burden of proving the
amount of the increased deficiency. Rule 142(a).
Petitioner contends that INI did not cease doing business in
1991, and that it is a corporation in good standing with the
State of Georgia. Petitioner submits that INI's participation in
the earlier case tried before this Court, and in an appeal of our
decision in that case to the Court of Appeals for the Eleventh
Circuit, is evidence of its business activity. Furthermore,
petitioner contends that the Internal Revenue Service's (IRS)
notice of levy issued to INI on June 18, 1992, is evidence that
the IRS continues to deal with INI as an active, viable entity.
Thus, petitioner asserts that he did not receive income from the
discharge of indebtedness in 1991.
Both parties rely on the returns filed by INI for its fiscal
years ended 1990 through 1994 to prove their respective
positions.
The issue is not whether INI, Inc., was in business in 1991,
but whether petitioner received income from the discharge of
indebtedness in that year. The forgiveness of an indebtedness is
deemed to have occurred when it becomes reasonable to assume that
the debt will probably never be paid. Exchange Sec. Bank v.
United States, 492 F.2d 1096, 1099 (5th Cir. 1974) (cancellation
27 We have found that the $128,429 of petitioner's indebtedness
to Spalding that was transferred to INI in the splitup was not a
distribution to petitioner. Therefore, the balance of the loan
account at the end of 1991 was at least $150,196 ($21,767 plus
$128,429).
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