Mazhar Tabrezi, f.k.a. Agha Hussain, and Sajida Razvi - Page 2

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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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