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Petitioner signed a deed conveying his interest in the
property to his brother, with the intent of his brother
possessing the property. On the basis of the record before us,
we find that petitioner did not abandon the property.
Accordingly, we hold that petitioner is not entitled to a
deduction for an abandonment loss with regard to the
Stockton/Elsie property in 1995.
B. Cancellation of Indebtedness (COD) Income
Respondent argues that petitioner must recognize income in
1995 of $111,229. This amount is the total amount Angelo paid in
1993 and 1994 on behalf of petitioner with regard to cleanup
expenses related to the Stockton/Elsie property. Respondent
contends that because petitioner has not repaid the amount and
Angelo has not attempted to collect it, petitioner should
recognize the amount as COD income in 1995, when the property was
transferred to Angelo. Petitioner argues that the debt owed to
Angelo was outstanding in 1995 and petitioner had a “good faith
intent” to repay these advances.
“Income from discharge of indebtedness” is included in gross
income. Sec. 61(a)(12). Petitioner and Angelo testified at
trial regarding these advances. Having observed petitioner’s and
Angelo’s appearances and demeanors at trial, we find their
testimonies on this issue to be honest, forthright, and credible.
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