- 3 - FINDINGS OF FACT This case was submitted fully stipulated pursuant to Rule 122. The stipulation of facts is incorporated herein and found accordingly. Petitioner, Mel T. Nelson, resided in Denver, Colorado, at the time he filed the petition herein. Petitioner was the sole shareholder in Metro Auto, Inc. (MAI), an S corporation. During the 1991 taxable year, MAI disposed of all of its assets. In the same year, MAI realized discharge of indebtedness income, pursuant to section 61(a)(12), in the amount of $2,030,568 as a result of the disposition and a related agreement between MAI and its creditors.3 In turn, the COD income of $2,030,568 exceeded MAI's losses by $1,375,790 in 1991. Prior and subsequent to the event giving rise to the COD income, MAI was insolvent. MAI excluded from its gross income the entire amount of the indebtedness discharged by its creditors. Petitioner increased the basis of his stock in MAI by $1,375,790 in 1991. Subsequently, petitioner disposed of his stock in MAI and, in turn, claimed a long-term capital loss on 2(...continued) $54,275, thereby increasing petitioner's taxable income by $54,275. 3Discharge of indebtedness is also referred to as cancellation of debt income (COD). For purposes of convenience and clarity in this opinion, we refer to the income generated from the discharge of indebtedness pursuant to sec. 61(a)(12) as COD.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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