- 5 -
Respondent issued petitioners a notice of deficiency for
1995 determining, inter alia, that the $1,512,193 was forgiveness
of indebtedness income and therefore taxable. Respondent also
disallowed the claimed Schedule C deduction for $999,090 and
determined an accuracy-related penalty pursuant to section
6662(a). Petitioners filed a timely petition for review with the
Court, and respondent filed an answer.
During October 2005, respondent contacted the FDIC. In
response to respondent’s inquiry, the FDIC indicated that the
$1,512,193 reported on the Form 1099-C reflected only the amount
of loan principal that was forgiven;3 as part of the settlement
agreement, the FDIC also had forgiven amounts owed for interest,
late charges, attorney’s fees, and other costs that were not
reflected in the Form 1099-C. (For convenience, we refer to the
interest, late charges, attorney’s fees, and other costs as the
related items.) Respondent filed an amendment to answer seeking
to increase the deficiency to include forgiveness of indebtedness
income attributable to the related items.
3 Respondent contends that the $1,512,193 figure was
calculated as follows: The FDIC first applied the $975,000
payment toward accrued interest of $734,809. The balance of
$240,191 was then applied to reduce the outstanding principal
from $1,752,384 to $1,512,193. This latter figure, according to
respondent, represents the amount shown on the Form 1099-C,
Cancellation of Debt. The settlement agreement does not specify
how the $975,000 was allocated, however, and for purposes of the
instant motion we do not decide if respondent’s calculation is
correct.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: November 10, 2007