Dennis and Dorinda J. Jelle - Page 12




                                       - 12 -                                         
          the inception of the net recovery buyout recapture agreement,               
          then in accordance with the terms of that agreement, petitioners            
          could be required to repay part or all of the $177,722 written              
          off by FmHA.  If petitioners chose not to dispose of their                  
          property, then, of course, nothing further would be due.                    
          Petitioners’ obligation was thus “highly contingent” in every               
          sense of the word.  This state of affairs fits perfectly within             
          the precept formulated in Zappo v. Commissioner, supra, that a              
          highly contingent obligation will not be treated in pari materia            
          with a more conventional counterpart.                                       
               Petitioners’ initial debt to FmHA, the “conventional                   
          counterpart” in this case, was fixed in amount, bore a stated               
          rate of interest, and required periodic payments.  In contrast,             
          petitioners’ liability under the recapture agreement had no                 
          certain amount, was not interest bearing, and mandated no                   
          definite payments.  An enforceable financial obligation may in              
          fact never materialize at all.  Faced with these differences, we            
          cannot reasonably view the latter alleged debt as a mere                    
          substitute for the former.                                                  
               We are convinced that the rationale of United States v.                
          Kirby Lumber Co., 284 U.S. 1 (1931), is particularly applicable             
          here where the recapture agreement leaves petitioners in complete           
          control of their assets and free to arrange their affairs so that           
          none of their property’s value need ever be delivered to FmHA.              






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  Next

Last modified: May 25, 2011