- 7 -
plan included certain terms which in effect made the Benton
estate a mere nominee.
On September 1, 1997, the first day following the effective
date of the plan, petitioner was discharged under the provisions
of Bankruptcy Code section 1141(d) from any debt that arose
before confirmation, and he was relieved of his status as
“debtor-in-possession”.
On his 1997 Federal income tax return, petitioner claimed
approximately $84 million in NOLs, which he maintained had been
generated by the Benton estate (his bankruptcy estate) in
accordance with paragraphs 6, 7, and 8 of the above settlement
agreement and had not been used by the Benton estate.1
Petitioner contends that the NOLs were derived from the Benton
estate as of August 31, 1997, the effective date of the confirmed
plan. During April 1999 petitioner filed a Form 1040X, Amended
U.S. Individual Income Tax Return, for the short tax year 1995
1 Benton v. Commissioner, 122 T.C. 353, 357 (2004) (Benton
I), contained the statement that the approximately $84 million in
NOLs petitioner claimed had arisen before the commencement of the
bankruptcy proceeding. The parties’ current disagreement reveals
that respondent may have misinterpreted our statement in Benton
I. The $84 million in NOLs are derivative of the $84 million in
suspended passive losses petitioner incurred before commencement
of the bankruptcy proceeding. The suspended passive losses
became NOLs by operation of law upon the disposition of the
entire interest in the activity that gave rise to the suspended
passive losses. That conversion to NOLs occurred during the
bankruptcy proceeding. Therefore, the $84 million in NOLs
petitioner claimed did not arise before the bankruptcy (i.e., did
not arise before Feb. 23, 1995) and were not prebankruptcy NOLs
of petitioner.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011