Justin W. Ellis - Page 6

                                        - 5 -                                         
          set forth specific facts showing that there is a genuine issue              
          for trial.”  Petitioner’s opposition to the Motion for Summary              
          Judgment argues that he is entitled to a ruling as a matter of              
          law.  We conclude that the material facts are not disputed and              
          that judgment may be rendered as a matter of law.                           
               Section 61(a)(12) specifically identifies cancellation of              
          indebtedness as an item includable in gross income.  In Cozzi v.            
          Commissioner, 88 T.C. 435, 445 (1987), the Court stated:                    
               The general theory is that to the extent that a                        
               taxpayer has been released from indebtedness, he has                   
               realized an accession to income because the                            
               cancellation effects a freeing of assets previously                    
               offset by the liability arising from such indebtedness.                
               United States v. Kirby Lumber Co., 284 U.S. 1 (1931).                  
               Whether a debt has been discharged is dependent on the                 
               substance of the transactions.  Mere formalisms                        
               arranged by the parties are not binding in the                         
               application of the tax laws.  Commissioner v. Court                    
               Holding Co., 324 U.S. 331 (1945).  Consequently, the                   
               surrender or failure to surrender a note is not                        
               determinative of the release of liability.  Seay v.                    
               Commissioner, T.C. Memo. 1974-305.                                     
                    The moment it becomes clear that a debt will never                
               have to be paid, such debt must be viewed as having                    
               been discharged.  The test for determining such moment                 
               requires a practical assessment of the facts and                       
               circumstances relating to the likelihood of payment.                   
               * * *  Any “identifiable event” which fixes the loss                   
               with certainty may be taken into consideration.  United                
               States v. S.S. White Dental Mfg. Co., 274 U.S. 398                     
          Notwithstanding the arguments he made in his correspondence with            
          GMAC, petitioner now argues that GMAC did not execute a formal              
          release in writing or otherwise indicate its intent to release              
          and discharge petitioner.  Sending the Form 1099-C, however, is             

Page:  Previous  1  2  3  4  5  6  7  Next

Last modified: May 25, 2011