OKC Corp. v. Commissioner
United States Tax Court
1. During 1971, in settlement of a lawsuit over the price to be paid under a refined products output contract, X forgave over $ 2.6 million in principal indebtedness that Y owed it for Y's purchase of a refinery from X in 1966. Held: The discharge of indebtedness constituted a payment in settlement of a claim for profits; accordingly, the settlement "proceeds" are ordinary income to Y. The exclusion provided by sec. 108, I.R.C. 1954, does not apply. 2. During 1969, Y began…
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1. During 1971, in settlement of a lawsuit over the price to be paid under a refined products output contract, X forgave over $ 2.6 million in principal indebtedness that Y owed it for Y's purchase of a refinery from X in 1966. Held: The discharge of indebtedness constituted a payment in settlement of a claim for profits; accordingly, the settlement "proceeds" are ordinary income to Y. The exclusion provided by sec. 108, I.R.C. 1954, does not apply. 2. During 1969, Y began construction of an HF alkylation unit at the refinery. Prior to Apr. 19, 1969, Y staked out the jobsite and had test soil…
1Opinion of the Court
Simpson, Judge:
The Commissioner determined the following deficiencies in the petitioners’ Federal income taxes:
Docket No. Petitioner TYE Sept. 30— Deficiency
$328,827.26 459,287.61 15100-80 OKC Refining, Inc. CD CD Oi CO <1
15099-80 OKC Corp. 1969 109,383.56 and Subsidiaries 1970 7,472.56 1971 713,954.58
After concessions by the parties, the issues remaining for decision are: (1) Whether OKC Refining, Inc., must recognize income on the discharge during 1971 of indebtedness owed by it; and (2) whether the alkylation unit built by OKC Refining, Inc., during 1969 is eligible for the investment tax…
2Cases cited42 opinions
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