110 T.C. No. 12
UNITED STATES TAX COURT
MEL T. NELSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20811-95. Filed February 19, 1998.
Petitioner was the sole shareholder of M, an S
corporation. In the 1991 taxable year, M was
insolvent. In that year, M disposed of all of its
assets and realized discharge of indebtedness income
pursuant to sec. 61(a)(12), I.R.C. In accordance with
sec. 108(a), I.R.C., M excluded from gross income the
entire amount of the discharge of indebtedness income.
Sec. 108(a), I.R.C., excludes from gross income,
discharge of indebtedness income if, inter alia, the
taxpayer is insolvent.
In the same year, petitioner increased the basis
of his stock in M. Later, petitioner disposed of the
stock. In turn, petitioner reported a long-term
capital loss on his 1991 Federal income tax return. R
disallowed a portion of the claimed long-term capital
loss on the premise that sec. 108(d)(7)(A), I.R.C., did
not permit an increase in petitioner's basis in M
stock. Sec. 108(d)(7)(A), I.R.C., provides that the
discharge of indebtedness income exclusion from gross
Page: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011