Larry A. and Kathleen T. Monico - Page 9

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            make the Chef-Reddy payments is the kind of promise to pay that                             
            is frequently transferred to lenders or investors at a discount                             
            not substantially greater than the generally prevailing premium                             
            for the use of money.  We therefore find that the obligation to                             
            make the Chef-Reddy payments is not the equivalent of cash.                                 
                  C. Cottage Sav. Association v. Commissioner                                           
                  Petitioners attempt to buttress their argument by citing                              
            Cottage Sav. Association v. Commissioner, 499 U.S. 554 (1991)                               
            (exchange of property gives rise to a realization event under                               
            section 1001 so long as the exchanged properties are “materially                            
            different”; i.e., so long as they embody a legally distinct                                 
            entitlement).  Petitioners argue that, when Larry Monico                                    
            “exchanged the account receivable for the promissory note, the                              
            Petitioners realized and should have recognized income.”                                    
            Petitioners have failed to prove that there was any such                                    
            exchange.  Moreover, they have failed to prove any material                                 
            change in the obligation.  Cottage Savings Association is                                   
            inapplicable.                                                                               
            II.  Conclusion                                                                             
                  Petitioners have failed to prove that the Chef-Reddy                                  
            payments constitute a return of capital.  That being the                                    
            exclusive basis on which they assigned error to respondent’s                                
            determination of a deficiency with respect to the Chef-Reddy                                








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