Gilbert Hahn, Jr. and Margot H. Hahn - Page 13

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          liability was not at issue.6  Bradford v. Commissioner, 233 F.2d            
          at 939.  Furthermore, in a later case, the Court of Appeals for             
          the Sixth Circuit questioned whether discharge of indebtedness              
          income might have been realized in an earlier year.  Tenn. Sec.,            
          Inc. v. Commissioner, 674 F.2d 570, 574 (6th Cir. 1982) (“Viewing           
          the Bradfords as an economic unit might perhaps raise questions             
          of income to them collectively upon the bank’s discounting the              
          note.”), affg. T.C. Memo. 1978-434.  We also note that                      
          petitioner, unlike the taxpayer in Bradford, applied the loan               
          proceeds to obligations of his own.  Accordingly, we believe that           
          Bradford is inapposite.                                                     
               For the foregoing reasons, we conclude that petitioner may             
          have realized discharge of indebtedness income from the                     
          forgiveness of the related items.  Accordingly, petitioner’s                
          first argument fails.                                                       
          II. Whether payment of the related items would be deductible as             
               ordinary and necessary business expenses                               
               Petitioner’s second argument is that the payment of the                
          related items would have given rise to a deduction as ordinary              

               6 After the Court of Appeals for the Sixth Circuit issued              
          its opinion, the Commissioner determined a deficiency against the           
          taxpayer’s husband arising from the same transaction.  See                  
          Bradford v. Commissioner, 34 T.C. 1051 (1960).  The notice of               
          deficiency was untimely due to the expiration of the applicable             
          limitations period for assessment, however, and we entered a                
          decision for the taxpayer’s husband on that ground.  Id. at 1059.           
          Thus, neither the Court of Appeals nor this Court addressed                 
          whether the taxpayer’s husband had realized discharge of                    
          indebtedness income.                                                        

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