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from liability as permitted by the confirmed bankruptcy plan. On
September 15, 1995, decedent executed a contribution agreement
and pursuant to its terms contributed $15,000 to the
partnership’s bankruptcy estate in exchange for release of “all
claims or potential claims of creditors against * * * [decedent]
arising out of or related to” the partnership.
On December 19, 1995, the bankruptcy court entered an order
approving the contribution agreement. In its order, the
bankruptcy court specifically discharged and released decedent
from any and all liability to the trustee and the bank arising
out of or relating to the partnership, decedent’s status as a
general partner in the partnership, and the April 9, 1985,
personal guaranty agreement. In addition, the bankruptcy court’s
order released decedent from “the claims or potential claims of
all creditors” of the partnership. The bankruptcy court further
ordered that decedent “is subject to the jurisdiction of the
Bankruptcy Court.”
Tax Reporting
For the 1995 tax year, the partnership issued decedent a
Schedule K-1, Partner’s Share of Income, Credits, Deductions,
etc., allocating to him $397,640 of discharge of indebtedness
income. Decedent excluded this entire amount from his gross
income as reported on his 1995 Federal income tax return.
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Last modified: May 25, 2011