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Gregory W. MacNabb, for petitioners.
Ann M. Welhaf, for respondent.
HALPERN, Judge: In these consolidated cases, respondent
determined deficiencies in the Federal income tax of petitioners
Dudley and La Donna Merkel and David and Nancy Hepburn for their
1991 taxable (calendar) years in the amounts of $115,420 and
$116,347, respectively. Both cases involve similar circumstances
and require us to determine whether petitioners in the two cases
(the Merkels and the Hepburns, respectively) may exclude under
section 108(a)(1)(B) certain income from the discharge of
indebtedness. Unless otherwise noted, all section references are
to the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts, with accompanying exhibits, is
incorporated herein by this reference.
At the time the petitions were filed, the Merkels and the
Hepburns resided in Scottsdale and Paradise Valley, Arizona,
respectively.
Discharge of Indebtedness Income
During 1991, the Merkels and the Hepburns were all partners
in a partnership (the partnership) that, on September 1, 1991,
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