- 31 -
The term "proceeds" is defined to include "whatever is received
upon the sale, exchange, collection, or other disposition of
collateral". N.Y.U.C.C. Law sec. 9-306(1) (McKinney 1990).
We need not get into the fine points of the commercial law
involved. Assuming, for the sake of argument, that, upon the
default of Sha-Li or RTS to MHLC, MHLC could have moved around
the circle and ended up with petitioner being liable for any
deficiency, we do not see how that aids petitioner. First, that
did not happen during any of the years in question. We have
found that both the assignment agreements and the loan agreement
were nonrecourse debts. Sec. I.C.3., supra p. 27. The analysis
of the Court of Appeals for the Second Circuit in Waters v.
Commissioner, 978 F.2d at 1317, with regard to nonrecourse debt
is apt:
In any event, the pertinent "arrangement" to be
assessed at the close of each taxable year was the
existing nonrecourse debt, not the theoretical
possibility that its nonrecourse nature would be
disregarded by * * * [RTS] in some future contingency.
The commercial law consequences that petitioners put forth were
both theoretical and contingent during the years in question, and
do not change our analysis of the meaningless nature of the
circle of payments. Second, the payment deferral provisions
discussed above dilute even more the argument that petitioner had
any present liability. Third, the indemnification provisions
eliminate it entirely.
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011