TAX COURT OPINION

Case: Terry J. & Bernadine Tatom
Docket Number: 18304-08S
Judge: Colvin
Opinion Type: bench
Filed: 07/02/2009
Pages: 4

UNITED STATES TAX COURT WASHINGTON, D.C. 2021 7 TERRY J . AND BERNADINE TATOM , Petitioners, SERVICE v . ) Docket No . COMMISSIONER OF INTERNAL REVENUE, Respondent . O R D E R Pursuant to Rule 152(b), Rules of Practice and Procedure of this Court, it i s ORDERED that the Clerk of the Court shall transmit to petitioners and to respondent a copy of the pages of the transcript of the trial of the above case before Jude Diane L . Kroupa at San Francisco on June 16, 2009, containing her oral finding of fact . and opinion rendered .at the conclusion of trial . In accordance with the oral findings of fact and opinion, an appropriate decision will be entered for respondent . (Signed) Diane L . Kroupa Judg e Dated : Washington, D .C . July 2, 2009 SERVED JUL - 6 2009 3 1 Bench Opinion by Judge Diane Kroupa June 16, 2009 2 Terry J . & Bernadine Tatom v . Commissioner 18304-08S 3 THE COURT : The Court has decided to render ora l 4 findings of fact and opinion in this case, and the following 5 represents the Court's oral findings of fact and opinion . 6 These oral findings of fact and opinion shall not be relied 7 upon as precedent in any other case . 8 This proceeding was heard as a small tax case, 9 pursuant to the provisions of section 7463 and Rules 170 10 through 175 . All section references are to the Interna l 11 Revenue Code for the year 2005, which year shall be referred 12 to as the year at issue . And all rules references are t o 13 the Tax Court Rules of Practice & Procedure . 14 This bench opinion is made pursuant to the 15 authority granted by section 7459(b) and Rule 152 . 16 Bernadine and Terry Tatom appeared on their own 17 behalf, and Kaelyn Romey appeared on behalf of Respondent . 18 FINDINGS OF FAC T 19 Petitioners filed a return for 2005 but failed to 20 report a $1310 state tax refund and a $7167 credit car d 21 forgiveness for 2005 . Petitioners conceded at trial the 22 state tax refund . With respect to the debt forgivenes s 23 issue, Petitioners' position has changed somewhat . Before 24 trial, Petitioners admitted receiving the cancellation of 25 indebtedness but claimed the issuer of the 1099-C promised Heritage Reporting Corporatio n (202) 628-4888 4 1 them that it would not report the debt cancellation to the 2 Service if Petitioners set up a payment plan for th e 3 remainder of the debt . 4 At trial, Petitioners admitted receiving the 5 cancellation of indebtedness but claimed the debt was 6 cancelled in 2004, not 2005 . 7 Respondent issued a statutory deficiency notice to 8 Petitioner dated May 12th, 2008, determining a $127 5 9 deficiency in Petitioners' federal income tax by including 10 the state refund and debt cancellation in income for 2005 . 11 Petitioners timely filed a petition to contest th e 12 deficiency determination . 13 At the time they filed the petition, Petitioners 14 resided in California . 15 OPINION 16 Petitioners concede they should have included the 17 state income tax refund in income for 2005 . The sole issue 18 for decision is whether Petitioners must include the debt 19 cancellation in income in 2005 . 20 21 Income from the discharge of indebtedness is 22 included with the broad definition of income . Sec . 23 61(a)(12) . 24 The underlying rationale for inclusion is that the 25 taxpayer realizes an accession to income by being released Heritage Reporting Corporatio n (202) 628-4888 5 1 from liability due to the freeing up of assets previousl y 2 burdened with the liability . Jelle v . Commissioner , 116 TC 3 63, 67 (2001) . . 4 Debt discharge generally produces income equal to 5 the difference between the amount due on the obligation and 6 the amount paid for the discharge . Sec . 61(a)(12) . 7 Petitioners assert that they paid a total of $700 9 8 made up of a $600 payment and $6409 lump- sum payment . 9 Petitioners failed to prove how much the original debt they ,A pey-I 10 owed on the credit card at the time they made the payment t o 11 forgive the debt . The record reflects that $7167 was the 12 amount forgiven . Petitioners provided no credible evidence 13 that the debt was not forgiven in 2005 . 14 We therefore find that Petitioners must include 15 the $7167 debt forgiven in 2005 . To reflect the foregoing, 16 decision will be entered for Respondent . 17 This concludes the Court's oral findings of fact 18 and opinion in this case . 19 (Whereupon, at 5 :52 p .m ., the bench opinion in the 20 above-entitled matter was concluded . ) 2 1 22 23 24 25 Heritage Reporting Corporation (202) 628-4888