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discharge of indebtedness income (also referred to as
cancellation of debt (COD) income) excluded from gross income
under section 108(a), and (2) whether petitioners are liable for
the accuracy-related penalties for negligence or disregard of
rules or regulations for 1990 and 1991. Respondent has conceded
that portion of the penalty for each year that relates to the
first issue to be decided in this case. Unless otherwise
indicated, all section references are to the Internal Revenue
Code as in effect for the years in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
This case was submitted fully stipulated pursuant to Rule
122. The stipulated facts are incorporated herein by this
reference. Petitioners resided in Orlando, Florida, at the time
they filed the petition.
Background
The first issue in this case concerns petitioner's interest
in Epoch Capital Corporation (ECC). ECC was incorporated in the
State of Florida on December 10, 1987. ECC had properly elected
to be treated as an S corporation pursuant to section 1362 prior
to 1990, and such election was effective for ECC's taxable year
ended December 31, 1990.
ECC realized COD income during 1990 in the amount of
$661,357. ECC was liquidated in 1990. Articles of Dissolution
were filed with the State of Florida on December 18, 1990.
Petitioner did not receive any distributions from ECC upon
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