TAX COURT OPINION

Case: Isaac Calvin
Docket Number: 1258-08S
Judge: Colvin
Opinion Type: bench
Filed: 06/22/2009
Pages: 6

UNITED STATES TAX CQURT UP- WASHINGTON, DC 2021 7 ISAAC CALVIN, Petitione r V . COMMISSIONER OF INTERNAL REVENUE , Respondent . O R D E R Docket No . 1258-08S . Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Richmond, Virginia, on June 1, 2009, containing his oral findings of fact and opinion rendered at the conclusion of the trial . . In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155 . (Signed) Joseph Robert Goeke Judge Dated : Washington, D .C . June 22, 2009 SERVED JUN 2 3 2009 3 1 Bench Opinion by Judge Joseph Robert Goeke June 1, 2009 2 Isaac Calvin v . Commissioner Docket No . 1258-08S 3 THE COURT : The Court has decided to render 4 oral findings of fact and opinion in this case, an d 5 the following represents the Court's oral findings of 6 fact and opinion . The oral findings of fact an d 7 opinion shall not be relied upon as precedent in any 8 other case . 9 This case was heard pursuant to th e 10 provisions of § 7463 of the I ternal Revenue Code in 11 effect at the time the petition was filed . Pursuant 12 to § 7463(b), the decision to be entered is no t 13 reviewable by any other Court and the opinion shall 14 not be treated as precedent for any other case . 15 This bench opinion is issued pursuant to 16 Rule 152 of the Tax Court Rul~s of Practice an d 17 Procedure . 18 This case is based pon Respondent' s 19 determination of a deficiency in income tax for 2005 20 in the amount of $2,878 . The Petitioner timel y 21 petitioned the notice of deficiency issued by 22 Respondent . 23 Petitioner previously had timely filed a 24 federal income tax return for the year 2005 . Th e 25 parties have been able to resolve some of the issues Heritage Reportin~ Corporatio n (202) 628L4888 4 1 in dispute in the notice of deficiency . The issues 2 remaining for trial, which were tried this date , 3 include Respondent's determin tion that the Petitioner 4 had failed to report $9,440 o : cancellation o f { 5 indebtedness income and Respondent,s determinatio n 6 that Petitioner had also failed to report a state tax 7 refund, which was taxable in 2005, in the amount o f 8 $687 . 9 Petitioner concedes that he is liable for 10 the 10 percent additional tax of $1,532 of early 11 pension distribution he recei-N ed in 2005 . And 12 Respondent concedes that Petitioner should be allowed 13 additional withholding credit in the amount of $306 14 in connection with the early pension distribution i n 15 2005 . 16 The case was submit ed based upon a 17 stipulation of facts, and the Petitioner testified an d 18 three additional exhibits wer admitted at trial . 19 The Petitioner does not contest all of th e 20 amounts of forgiveness of indebtedness incom e 21 determined by Respondent but ~ather makes two distinct 22 arguments about the forgiveness of indebtednes s 23 income . Petitioner asserts t at he disputes the 24 amounts of the forgiveness of indebtedness incom e 25 associated with attorneys' fees, which were added to Heritage Reportin Corporatio n (202) 6281-4888 5 1 his indebtedness by the lending institutions . 2 He claims that the imounts owed had bee n 3 settled in the year 2004 and the attorneys' fees were 4 added in 2005 simply because the indebtedness amounts 5 agreed had not been paid because the amounts wer e 6 frozen pursuant to his state divorce action with his 7 former spouse . 8 Petitioner also claims that one o f 9 indebtedness amounts was a joint amount and that the 10 taxable income was properly one half his and one half 11 his former spouse's income . 12 Relative to the stale tax refund, Petitioner 13 claims that a portion of the refund actually had to be 14 repaid to the state of Virginia in a later year . The 15 record, however, demonstrate s that Petitioner i s 16 incorrect and that the amount repaid was for a 17 different taxable year than the refund amount he 18 received in 2005, which was for the 2004 taxable year . 19 The notice of defic iency determined tha t 20 this refund amount was taxable to the Petitione r 21 because he had claimed the amount in question as an 22 itemized deduction in 2004 an the Petitioner wa s 23 unable to establish that this determination wa s 24 incorrect . 25 The legal principle s involved are set fort h Heritage Reporting Corporation (202) 628 1L 4888 6 1 in Internal Revenue Code § 61 ( a)(12), which indicate s 2 that the petitioner is required to include in gross 3 income any amount of debt which was forgiven during 4 the taxable year 2005 . 5 Cancellation of indebtedness income does no t 6 include amounts received by te Petitioner when he was 7 insolvent at the time of the ebt's discharge . 8 However, the Petitioner does rot claim that he wa s 9 insolvent and produced no ev i ence to support the fac t 10 that he was insolvent . However, Petitioner does 11 maintain that he disputes som of the underlying 12 liabilities and does not belive that thes e 13 liabilities were properly associated with th e 14 indebtedness in question . 1 5 1 6 1 7 1 8 1 9 2 0 21 Amounts that are legitimately in dispute an d settled as part of a resoluti on with the lending institution are not includabl Ii as income if petitioner establishes there was a legit mate dispute as to the underlying liability . We find that Petiti oner's testimony support s his assertion that there was a dispute with respect t o 22 a certain portion of the indebtedness in question, 23 that portion being two amounts added to the 24 indebtedness for attorneys' Bees in the year 2005, on e 1 25 in the amount of $420 .33 and a separate attorneys ' Heritage Reporting Corporation (202) 628-4888 4 7 1 fees adjustment in the amoun t of $3,157 .99 . 2 In addition, we find that Petitioner is onl y 3 taxable on one half of the amount of $1,931 . With th e 4 exception of these three amounts, we find tha t 5 Petitioner is taxable on the 'emaining portion o f 6 Respondent's determination of $9,440 in indebtednes s 7 income . 8 We also find that the Petitioner has not 9 established that he is not taxable on the amount o f 10 Virginia state tax refund he eceived in 2005, and s o 11 we find for Respondent with respect to that entire 12 amount of adjustment . 13 Because the parties have settled variou s 14 other issues, a Rule 155 computation will be necessary 15 to reflect those settlement amounts and to reflect th e 16 determinations in this benc h !opinion . 17 Before concluding,, the Court wishes to not e 18 its appreciation of Respondent's counsel's efforts to 19 work with the Petitioner in this case and Petitioner's 20 courteous and professional demeanor throughout th e 21 trial . 22 This concludes the Court's oral findings of 23 fact and opinion in this cas . 24 (Whereupon, at 1 :48 p .m ., the bench opinion 25 in the above-entitled matter was concluded . ) Heritage Reporting Corporation (202) 62~-4888