International Tel. & Tel. Corp. etc. v. Commissioner

International Telephone & Telegraph Corporation and Affiliated Companies, Petitioners v. Commissioner of Internal Revenue, Respondent International Tel. & Tel. Corp. etc. v. Commissioner Docket No. 7990-75 United States Tax Court 77 T.C. 1367; 1981 U.S. Tax Ct. LEXIS 1; December 31, 1981, Filed *1 Decision will be entered under Rule 155. In our original opinion in this proceeding, we held that petitioners had not met their burden of proof as to the measure of any loss realized by ITT Avis or ITT Aetna on the retirement of convertible debentures. Petitioners' motion to reopen the record for submission of evidence on this issue was granted. Held, on the retirement of the debentures in 1965, ITT Avis and ITT Aetna sustained ordinary losses of $ 1,204,538 and $ 45,276.50, respectively. Stephen D. Gardner, for the petitioners. Julius A. Jove, for the respondent. Tannenwald, Chief Judge. TANNENWALD *1367 SUPPLEMENTAL OPINION The original opinion in this proceeding, International Telephone & Telegraph v. Commissioner, 77 T.C. 60, was issued on July 9, 1981. In that opinion, we held that petitioners*2 had not met their burden of proof as to whether any loss was realized by ITT Aetna Finance Co. (ITT Aetna) or ITT Avis, Inc. (ITT Avis), on the retirement of Avis, Inc. (Avis), and Aetna Finance Co. (Aetna) subordinate convertible debentures. See 77 T.C. at 72-84. Petitioners timely filed a motion for leave to reopen the record for submission of additional evidence and for reconsideration of certain findings relating to the convertible debentures. See Rule 161, Tax Court Rules of Practice and Procedure. Respondent filed a written response to this motion, and a hearing was held on the matter. Petitioners' motion was granted "solely to the extent that the record is reopened in order that additional evidence may be submitted and briefs filed with respect to the measure and nature of the loss of ITT Aetna and/or ITT Avis." Order entered August 26, 1981. Respondent filed a motion for reconsideration reiterating *1368 arguments which we had considered in our original opinion. Respondent's motion was denied. In respondent's brief filed pursuant to our order of August 26, 1981, respondent argues that section 118, I.R.C. 1954, precludes the realization *3 of any loss by ITT Avis and that "no loss" is encompassed within the phrase "measure * * * of the loss" contained in that order. We disagree and hold that the issue which respondent seeks to raise falls outside the limitations of our order reopening the record. Respondent, while reserving his right on appeal to argue that ITT Avis and ITT Aetna did not realize and recognize any loss with respect to the convertible debentures, agrees with petitioners as to the calculation and characterization of the losses in question. The parties agree that ITT Avis and ITT Aetna suffered ordinary losses in 1965 of $ 1,204,538 1*4 and $ 45,276.50, 2 respectively. In view of the foregoing, we hold that petitioners have satisfied their burden of proof (see 77 T.C. at 80, 84), and that the Rule 155 computation should reflect this holding. As to all *1369 other matters, we adhere to our prior opinion. In accordance with our previous direction, Decision will be entered under Rule 155. Footnotes 1. The amount is calculated as follows: ↩ Avis 6% debentures Amount received by Avis on issuance $ 258,020 Plus allowable amortization of issuing expenses (or amount paid by bondholders on issuance of bonds, $ 266,000, less unamortized issuing expenses of $ 3,192) 4,788 262,808 ITT Avis deemed purchase price 424,781 $ 161,973 Avis 5 1/2% debentures Amount received by Avis on issuance 657,900 ITT Avis deemed purchase price 1,700,465 1,042,565 1,204,538 2. The amount is calculated as follows: ↩ Amount received by Aetna on issuance 409,492.50 Plus allowable amortization of issuing expenses (or amount paid by bondholders on issuance of bonds, $ 426,000, less unamortized issuing expenses of $ 9,904.50) 6,603.00 416,095.50 ITT Aetna deemed purchase price 461,372.00 45,276.50