Richard Mark Hilton - Page 7




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          Cancellation of Indebtedness Income                                         
               Gross income includes income from the cancellation of                  
          indebtedness.  Sec. 61(a)(12).  Respondent contends that                    
          petitioner had cancellation of indebtedness income of $2,136 from           
          American Express.                                                           
               Petitioner claims that there was no cancellation of debt               
          because the debt was already paid.  He contends that American               
          Express made a miscalculation, implying that the cancellation was           
          actually a correction to his account.  Petitioner, however,                 
          failed to offer any evidence to show that the debt was paid.                
          There is also no evidence that any of the exclusions under                  
          section 108(a)(1) applies.                                                  
               Therefore, petitioner had cancellation of indebtedness                 
          income of $2,136 in 2003.                                                   
          Section 6662(a) Accuracy-Related Penalty                                    
               Respondent determined that petitioner is liable for an                 
          accuracy-related penalty under section 6662(a).  Section 6662(a)            
          imposes a 20-percent penalty on the portion of an underpayment              
          attributable to any one of various factors, including negligence            
          or disregard of rules or regulations and a substantial                      
          understatement of income tax.  See sec. 6662(b)(1) and (2).                 
          “Negligence” includes any failure to make a reasonable attempt to           
          comply with the provisions of the Internal Revenue Code,                    
          including any failure to keep adequate books and records or to              







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