James R. and Susan B. Brickman - Page 5

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          accrued interest indebtedness to the bank.4  The partnership                
          treated the COD income as an item of partnership income and                 
          allocated the COD income separately to all of the partners,                 
          including James, pursuant to the "special allocation" provisions            
          of the partnership agreement.  On the 1992 Form K-1 that the                
          partnership issued to James, the partnership reported that it               
          allocated $6,166,647 of COD income to James.                                
               On petitioners' 1992 joint Federal income tax return,                  
          petitioners excluded $5,750,737 of the $6,166,647 of COD income             
          from their joint gross income due to insolvency pursuant to                 
          section 108(a)(1)(B) (the insolvency exception) and reported                
          $415,910 of the $6,166,647 of COD income.  Petitioners did not              
          reduce a $487,730 NOL carryover from 1992 to 1993 (Susan's NOL)             
          by the $5,750,737 of excluded COD income.5                                  

               4  The partnership reported the $14,094,231 of COD income on           
          its 1992 tax return because that is when the period of                      
          limitations for collecting on the note expired.  Additionally, in           
          1992, the period of limitations for collecting on the guaranty              
          also expired.                                                               
               5  Petitioners, in an attachment to their 1992 Form 1040,              
          explained the generation of Susan's NOL as follows:                         
                                        Total     James    Susan                      
               NOL generated in 1983    $67,432   $33,716   $33,716                   
               NOL generated in 1984    1,063,747 531,873   531,874                   
               NOL generated in 1985    590,075   295,037   295,038                   
               NOL generated in 1986    352,211   176,105   176,106                   
               NOL generated in 1987    340,178   170,089   170,089                   
               NOL utilized in 1988     (866,246)  (433,123)  (433,123)               
               NOL generated in 1989    233,969   116,984   116,985                   
               NOL generated in 1990    454,053   227,026   227,027                   
                                                             (continued...)           




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