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concessions,2 the remaining issues for decision are: (1) Whether
respondent has the burden of proof in this case under Rule
142(a); (2) whether petitioners must recognize cancellation of
indebtedness (COD) income under section 61(a)(12) of $62,707; and
(3) whether petitioners are liable for the accuracy-related
penalty under section 6662(a). We hold that (1) respondent has
the burden of proof in this case; (2) petitioners do not have to
recognize COD income because respondent failed to meet his burden
of proving that they were solvent on the date immediately
preceding the discharge of the debt (calculation date); and (3)
as a result, there is no accuracy-related penalty under section
6662(a).
1(...continued)
Court Rules of Practice and Procedure.
2On brief, respondent concedes that petitioners are not
liable for COD income attributable to the discharge of three
debts as determined in the notice of deficiency because that
income is excludable under sec. 108(a)(1)(B). However,
respondent also takes the position that petitioners must
recognize COD income of $62,707 from discharge of a fourth debt
that was not included in the notice of deficiency. In addition,
respondent continues to assert that petitioners are liable for
the accuracy-related penalty under sec. 6662(a). Respondent also
determined in the notice of deficiency that petitioners had gross
income of $13 in dividends received by Sajida Razvi from her
Mellon Investment Services account. Petitioners did not raise
this item of income in their petition or otherwise argue against
it throughout the litigation process. We therefore consider
petitioners to have conceded their liability on the dividend
issue.
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Last modified: May 25, 2011