Garry D. Acuncius and Danalene L. Acuncius - Page 2

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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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