Newman v. Commissioner
United States Tax Court
T.C. Memo 2016–125 (2016)
- Written by Brianna Pine, JD
Facts
In July 2008, Keith Newman (plaintiff) opened a checking account at Bank of America and deposited a total of $8,625 into the account. Of that amount, $8,500 came from a single check drawn on another account Newman held at Wells Fargo. Shortly after, Newman withdrew $8,000 in cash from Bank of America. However, the $8,500 check did not clear and was later returned to Wells Fargo. This resulted in the Bank of America account becoming overdrawn. Newman never repaid the overdraft, and Bank of America closed his account in August 2008. In December 2011, Bank of America issued Newman a Form 1099-C, reporting $7,875 in cancellation of debt income for that year. Newman did not report this amount as income on his 2011 federal income tax return. At that time, Newman had $35,000 in assets and $50,000 in liabilities. The commissioner of the Internal Revenue Service (defendant) assessed a deficiency. Newman petitioned the tax court for a redetermination, arguing that he did not have cancellation of debt income and that, even if he did, it was excludable from his gross income under § 108(a)(1)(B)’s insolvency exception.
Rule of Law
Issue
Holding and Reasoning (Vasquez, J.)
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