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OPINION
In the instant case, the principal issue for our
consideration is whether petitioners are entitled to an increase
in their basis in an S corporation's stock as a result of any
discharge of indebtedness income realized by that corporation.6
However, as a preliminary matter, we must ascertain whether New
Manchester, in actuality, realized COD income which, in turn,
determines whether petitioners are eligible to claim and carry
back, a $5,055,116 loss.
First, petitioners raise a procedural issue. They contend
that the Commissioner should bear the burden of going forward
with evidence establishing that the S corporation did not realize
COD income in the taxable year, 1992. We find that if the burden
of proof were shifted to respondent that he would have fulfilled
that requirement by a substantial preponderance of the evidence
before us. As will be shown below, the sum and substance of the
evidence in this case reflects that the S corporation, New
Manchester, did not realize COD income in the taxable year at
issue.
We now turn to whether petitioners' S corporation realized
COD income in the taxable year, 1992. Respondent argues that
6Discharge of indebtedness income is also referred to as
cancellation of debt income (COD income). For purposes of this
opinion, we refer to the income generated from the discharge of
indebtedness pursuant to sec. 61(a)(12) as COD income.
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