T.C. Memo. 1997-113
UNITED STATES TAX COURT
WALLACE R. NOEL AND ROBINETTE NOEL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18000-94. Filed March 5, 1997.
P owned stock in Corp. A. Corp. A operated numerous
restaurants under a franchise arrangement with Corp. B. P
sued both Corp. A and Corp. B, alleging two contract claims
and a tort claim. Corp. B and P entered into a settlement
agreement, whereby Corp. B purchased P's stock in Corp. A
and, in return, P released his claims against Corp. B. P
used some of the proceeds received as a result of the
agreement with Corp. B to settle a loan made to P by Bank X.
The loan balance consisted of both principal and accrued
interest. P also wrote off an investment in Company Y.
Held: $295,461 of the proceeds P received from Corp. B
is excludable under sec. 104(a)(2).
Held, further: Except for $219,000 of the fees that P
paid to his lawyers, P failed to substantiate his additions
to basis in Corp. A stock.
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