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Respondent determined a deficiency in petitioner’s Federal
income tax for the taxable year 1997 in the amount of $1,377.
The issue for decision is whether petitioner received income
from cancellation of indebtedness. We hold that he did.
Background
Some of the facts have been stipulated, and they are so
found. Petitioner resided in Lantana, Florida, at the time that
his petition was filed with the Court.
In or about 1991, petitioner began to incur debt on a credit
card issued to him by Mellon Bank. Petitioner incurred the debt
in helping to finance a home improvement project for a woman with
whom he was romantically involved. Subsequently, after the
relationship had soured, petitioner asked the woman for payment,
but she refused. Petitioner continued to carry a balance on his
credit card account.
In 1995, petitioner commenced an action against the woman in
the county court for Palm Beach County, Florida. In the action,
petitioner sought to recover based on an alleged oral contract
between the woman and him. In January 1996, judgment was entered
against petitioner on the ground that he was not a licensed
contractor and, therefore, was not entitled under Florida law to
recover on the alleged oral contract. Petitioner did not appeal
the judgment, nor did he otherwise further pursue the matter
against the woman. At no relevant time was the woman insolvent
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