- 2 - 95 percent ownership interest.1 The issue for consideration is whether petitioner may increase his Impact stock's basis by the amount of certain cancellation of indebtedness (COD) income that Impact realized at a time when it was insolvent.2 We hold that he may not. Unless otherwise stated, section references are to the Internal Revenue Code in effect for the years in issue. Rule references are to the Tax Court Rule of Practice and Procedure. Amounts are rounded to the nearest dollar. Background This case was submitted fully stipulated pursuant to Rule 122. The stipulation of facts and the accompanying exhibits are incorporated herein and found accordingly. Petitioners resided in Barrington, Illinois, at the time they filed their petition. They filed joint Federal income tax returns for the taxable years 1991 through 1994. At some point, petitioners filed Form 1045, Application for Tentative Refund. On Form 1045, they claimed 1991 through 1993 refunds based on a 1994 net operating loss deduction (NOLD) relating to petitioner husband's 95 percent interest in Impact. Impact suffered losses for the period 1992 through 1994. Petitioner's share of the 1992 loss was $120,630 (95 percent of 1 Staci K. Cronin is a petitioner solely by virtue of having filed a joint returns with her husband. Hereinafter, references to "petitioner" will be to petitioner husband, Jerome B. Cronin. 2 Discharge 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.Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011