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471. In contrast to Cornelius, the parties in the instant case
have stipulated that the advances in issue constitute open
account debt. Respondent has made no contention that any advance
and repayment constitutes a separate indebtedness or closed
transaction.
Based on the parties’ stipulations that the advances were
open account debt and respondent’s failure to contend that any
advance and repayment composed a separate transaction, we hold
that the basis of the open account indebtedness is properly
computed by netting at the close of the year advances of open
account debt during the year and repayments of open account debt
during the year. Cf. Cornelius v. Commissioner, 494 F.2d 465
(5th Cir. 1974). Consequently, the advances in 1999 and 2000
shielded petitioners from the realization of gain upon the
repayments during those years.
We have considered all contentions that the parties have
11(...continued)
1970), respondent did not dispute that advances and repayments of
open account debt were properly netted prior to determining
income on repayment. In that opinion, we stated: “The <net
payment’ approach utilized by petitioners has not been questioned
by respondent.” Id. at 882 n.6.
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