TAX COURT OPINION

Case: Oscar Orlando Guerra
Docket Number: 25701-13S
Judge: Buch
Opinion Type: bench
Filed: 12/15/2014
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 OSCAR ORLANDO GUERRA, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 25701-13S. ) ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to both petitioner and respondent a copy of the pages of the transcript of the trial in this case that contain the oral findings of fact and opinion that was rendered at the trial session at Washington, D.C. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. December 15, 2014 SERVED DEC 1 6 2014 Capital Reporting Company 3 1 2 Bench Opinion by Judge Ronald L. Buch November 3, 2014 3 Oscar Orlando Guerra 4 5 6 Docket No. 25701-13S FINDINGS OF FACT AND OPINION THE COURT: The following represents The 7 Court's oral findings of fact and opinion. The oral 8 9 10 11 12 13 14 15 16 17 18 findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code Section 7459(b) and Rule 152(a) of the Tax Court Rules of Practice and Procedure. And section references refer to the Internal Revenue Code or the Treasury Regulations in effect during the year at issue and Rule references are to the Tax Court Rules of Practice and Procedure. This case was heard pursuant to Section 7463 of the Internal Revenue Code in effect when the 19 petition was filed. 20 21 22 23 24 25 Under Section 7463(b), the decision to be entered in this case is not reviewable by any other court. And this opinion may not be treated as precedent for any other case. Background Mr. Guerra accumulated about $12,000 in 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 debt on his Fia credit card. The debt resulted from various household purchases, interest, and late fee charges. Mr. Guerra worked with a third party to settle the debt for less than the full amount. Mr. 6 Guerra set up a payment plan with the third party and 7 8 9 10 11 12 made regular payments to satisfy the reduced debt. Mr. Guerra timely filed his Form 1040 U.S. Individual Income Tax Return for 2011. He did not include any income from the discharge of his credit card debt. On August 12th, 2013, the IRS mailed Mr. 13 Guerra a notice of deficiency adjusting his income to 14 15 16 17 18 reflect the discharge of the credit card debt based on Form 1099(c), Cancellation of Debt, submitted by the credit card company. Mr. Guerra, while residing in Maryland, timely petitioned. 19 Discussion 20 The Commissioner' s determinations in a 21 written notice of deficiency are generally presumed 22 23 correct and taxpayers bear the burden of proving those determinations incorrect, Rule 142 (a) , Welch v. 24 Relvering, 290 U.S. 111, 115 (1933). 25 Taxpayers are required to maintain 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 sufficient records to show whether or not such person is liable for tax, Section 6001. The burden may shift to the Commissioner under Section 7491(a) if the taxpayer has complied 5 with the necessary substantiation requirements and 6 7 8 9 10 11 12 13 14 15 16 17 has maintained all records and cooperated with reasonable requests by the Commissioner regarding information and documents. In the instant case, Mr. Guerra has not provided documentation or records to challenge the deficiency and he does not assert that the burden should shift to Respondent. Further, under Section 6201(d), if a taxpayer asserts a reasonable dispute with regard to income reported on an information return and has fully cooperated with the Commissioner, the Commissioner must supplement the information return 18 with additional reasonable and probative information. 19 20 21 22 23 24 25 Although Mr. Guerra testified that he did not receive the Form 1099(c) addressed to the same address as he stated on the petition as his address, he does not dispute its contents or that a debt in the amount shown was discharged. Accordingly, the burden remains on Mr. Guerra. Generally, the term "income, " as used in 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the Internal Revenue Code, means income from any source, including income from the discharge of indebtedness; therefore, a taxpayer who has incurred a financial obligation that is later discharged or released has realized an accession to income, United States v. Kirby Lumber, 284 U.S. 1, 3 (1931). The rationale underlying this principle is that the discharge of a debt for less than its face value results in an economic benefit equivalent to income to the debtor, see also Pr:cdman v. Frs ede n Commissioner, 216 F.3d, 537, 545 (6th Cir. 2000), affg. T.C. Memo 1998-196. A debt is considered discharged at the moment in time when it becomes clear that it will not be repaid, Cozzi v. Commissioner, 88 T.C. 435, 445 (1987). Section 108 outlines exceptions where the discharge of debt is not included in gross income. These exceptions include that the discharge occurred in a Title 11 case or the taxpayer is insolvent. Mr. Guerra bears the burden of proving that he is entitled to claim such an exclusion, Rule 142(a), Welch v. Helvering, 290 U.S. 111, 115. Mr. Guerra does not dispute that the debt was discharged from his credit card bill. His 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 argument is only that he did not receive the Form 1099(c). Further, Mr. Guerra has not provided any evidence that the discharge should not be included in his income because he is eligible for an exclusion under Section 108. Accordingly, Respondent's adjustment to Mr. 8 Guerra's income is sustained. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 An appropriate order will be forthcoming. (Whereupon, at 2:17 p.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com