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Petitioner did not recognize in 1996 an existing and fixed
obligation to repay the $100,000; he did not make in 1996
provisions to repay the $100,000.
Parker did not make a gift of the $100,000 to petitioner.
Analysis7
Respondent contends that petitioner was required to include
in gross income for 1996 the $100,000 that petitioner received
from the sale of the Corporations, and that this inclusion is
required by the claim of right doctrine.
Petitioner maintains that the $100,000 that he received as
consideration for transferring his stock in the corporations to
Parker is not includable in gross income because his receipt of
the money did not satisfy the elements of the claim of right
doctrine. Specifically, petitioner contends that he did not
receive the money under a claim of right, and there was a
restriction on his economic use of the money. Petitioner
contends in the alternative that the $100,000 was a gift and thus
is excludable from gross income under section 102(a).
Respondent replies that petitioner’s 1996 fraudulent
purpose, which led to the bankruptcy court’s voiding of the 1996
7 Sec. 7491, which shifts the burden of proof to the
Commissioner if the taxpayer meets certain conditions, does not
apply in the instant case because the parties stipulated that the
examination of petitioner’s tax returns began before July 22,
1998, the effective date of sec. 7491. Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3001(a), 112 Stat. 726.
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