Karl F. Simonsen & Christina M. Simonsen v. Commissioner

150 T.C. No. 8

UNITED STATES TAX COURT KARL F. SIMONSEN AND CHRISTINA M. SIMONSEN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 29698-14. Filed March 14, 2018. Ps bought their home with nonrecourse debt. Five years later they moved out and converted their home to a rental property. Not long after, they completed a short sale of the rental property, and the bank discharged the debt. Ps claimed that the short sale and consequent debt forgiveness were two separate transactions, so they reported a substantial deductible loss and excludable cancellation-of- indebtedness…