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with respect to petitioners’ Federal income tax for 1997.2
The issues for decision are: (1) Whether petitioners had
income from discharge of indebtedness of $32,000 in 1997;3 and
(2) whether petitioners are liable for an accuracy-related
penalty pursuant to section 6662(a) and (d)(1).
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time they filed
their petition, petitioners resided in Cresson, Texas.
On October 22, 1992, petitioners signed a promissory note
with BankTEXAS, N.A. (BankTEXAS), for a loan in the amount of
$32,000. With regard to this loan, on March 26, 1992,
petitioners had signed a commercial security agreement with
BankTEXAS. This agreement gave BankTEXAS a security interest in
the listed collateral, which included boats and horses.4
Petitioners took out the loan in order to start a business,
Southwest Concepts, which consisted of an art gallery and a horse
training facility. In 1992, because of problems with the
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
3 Respondent conceded on brief the portion of the
adjustment attributable to the canceled commercial loan interest
in the amount of $14,395, pursuant to sec. 108(e)(2).
4 In 1993, petitioners sold the boats in violation of the
security agreement.
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