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1992 Income taxes 2,000
1994 Income taxes 5,000
Respondent determined that petitioners were liable for
income from discharge of indebtedness of $32,000 in 1997 and an
accuracy-related penalty of $1,858 due to a substantial
understatement of tax. When petitioners received the notice of
deficiency, this was the first time that they were aware that the
loan had been discharged in 1997 because they had not received
any of the notices from BankTEXAS.
OPINION
I. Income from the Discharge of Indebtedness
A. Burden of Proof
Section 7491 applies to this case because the examination in
this case began after July 22, 1998. Internal Revenue Service
Restructuring & Reform Act of 1998, Pub. L. 105-206, sec.
3001(c), 112 Stat. 685, 727. We do not find, however, that the
resolution of this case depends on which party has the burden of
proof. We resolve the issue on the basis of a preponderance of
evidence in the record. Assuming arguendo that petitioners do
have the burden of proof under section 7491, we still conclude,
on the basis of evidence in the record, that petitioners
recognized no discharge of indebtedness income with regard to the
BankTEXAS loan in 1997.
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