Chesapeake Outdoor Enterprises, Inc., Abel Trust, John E. Magee, Jr., Trustee, Tax Matters Person - Page 1

                                T.C.  Memo. 1998-175                                  

                               UNITED STATES TAX COURT                                

                  CHESAPEAKE OUTDOOR ENTERPRISES, INC., ABEL TRUST,                   
           JOHN E. MAGEE, JR., TRUSTEE, TAX MATTERS PERSON, Petitioner v.             
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 21830-96.                Filed May 12, 1998.                

                    C, an S corporation subject to the unified audit                  
               and litigation provisions of the Subchapter S Revision                 
               Act of 1982, Pub. L. 97-354, sec. 4(a), 96 Stat. 1691-                 
               1692, was insolvent within the meaning of sec.                         
               108(d)(3), I.R.C., during its TYE Mar. 19, 1992.  In                   
               that year, C realized cancellation of indebtedness                     
               (COD) income of approximately $995,000.  Sec.                          
               61(a)(12), I.R.C.  In accordance with sec. 108(a),                     
               I.R.C., C excluded from its gross income the entire                    
               amount of COD income realized in that year.  C asserts                 
               that such income is exempt from tax, and also that the                 
               characterization of such income is not a subchapter S                  
               item to which the FSAA relates for purposes of                         
               conferring jurisdiction under sec. 6226(f), I.R.C.                     
                    R concedes that any proposed adjustment to                        
               shareholder basis is inappropriate at the corporate                    
               level.  See Nelson v. Commissioner, 110 T.C. 114                       

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