Lewis C. Taishoff
Member Since: Aug 7th 2020
Oct 7th 2021
As you say, this decision is no surprise. The interesting part is the "brand name" gambit, keeping taxpayer as individual, rather that using the played-out single-stockholder Sub S or single-member LLC dodge.
Aug 19th 2020
The promissory note is not recorded; the mortgage (or, in CA, a deed of trust) is what is recorded. But the terms of the bailout statute expressly limit the use of the loan proceeds.
"Although [shoe company] recorded the deed of trust with the Los Angeles County, California, Registrar-Recorder, the $280,000 debt was not “incurred in acquiring, constructing, or substantially improving” the [residence] property. Indeed, the ... promissory note conditioned repayment of the $280,000 upon the sale of the [residence] property. Like the indebtedness of $500,000, the indebtedness of $280,000 was therefore not acquisition indebtedness, and thus [shoe company]'s cancellation of $35,000 of that indebtedness... shortly before the sale of the [residence] property was not cancellation of qualified principal residence indebtedness." 2020 T. C. Memo. 109, at p. 27.
Aug 7th 2020
I reported this opinion the day it was issued. See my blog taishoifflaw.com. My comments can be found under the title "Real Estate Taxation 102," 6/3/20. To find out what's going on at US Tax Court without waiting two months, take a look.