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Next, petitioners argue that the November 1993 distribution
was part of a cost-of-living adjustment which respondent concedes
would be a permissible modification to the series of substantially
equal periodic payments during the applicable 5-year period. See
Staff of Joint Comm. on Taxation, General Explanation of the Tax
Reform Act of 1986, at 717 (J. Comm. Print 1987). In this regard,
petitioners note that the $6,776 distribution, spread over the
latter 4 years of distributions, was only a 3.65-percent increase
over the prior $44,000 distributions and "was well within the
limits of a reasonable cost of living adjustment (CLA), and thus
not a modification."
Respondent claims, and we agree, that petitioners have failed
to prove that the purpose of the November 1993 distribution was to
serve as a cost-of-living adjustment. Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). Petitioners did not put forth any
evidence of the appropriate cost-of-living adjustment for the
relevant time period, nor did they explain how they arrived at the
figure calculated or why the adjustment was made in the form of a
lump-sum payment in November 1993 (rather than allocated over each
of the years).
Petitioner testified that the November 1993 distribution was
received after Sowhite Chemical filed for bankruptcy protection in
October 1993 and ceased making its monthly installment payments to
him. Thus, it is evident that petitioner received the distribution
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