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petitioner, stated the disallowed amounts and the years to which
they pertain, and adequately explained the calculations employed
in arriving at them.
II. Debt Settlement
The parties agree that the $392,796 bad debt deduction
resulted from the forgiveness in the debt settlement agreement of
that amount of accrued rent and, more specifically, a settlement
of the proceedings discussed above. The parties do not dispute
that PNC was entitled to deduct the eliminated debt as a bad debt
but challenge only the amount of that deduction allocable to
petitioner.
Petitioner argues on brief that the debt was settled after
Crittenton’s termination and that he, as a 50-percent shareholder
of H.K. Peach, is entitled to deduct half ($196,398) of the debt.
Petitioner focuses primarily on respondent’s reference to the all
events test and argues that this test was not met before
Crittenton’s redemption in that the redemption was a vital term
of settlement. Alternatively, petitioner argues, respondent’s
earlier resolution of this issue, coupled with respondent’s
representations to the Court, means that respondent is now
estopped from challenging the amount of his deduction in this
proceeding.
Respondent argues on brief that the debt was settled before
Crittenton’s termination. Thus, respondent concludes, only half
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