Don Ballantyne and Susanne C. Ballantyne - Page 17

               An installment obligation is canceled when there is "any               
          cessation of an obligation to pay that would otherwise continue to          
          exist."  Estate of Frane v. Commissioner, 98 T.C. 341, 350 (1992),          
          revd. in part on other grounds 998 F.2d 567 (8th Cir. 1993).  The           
          fact that cancellation occurred within a short time after the note          
          was given to petitioner does not preclude or otherwise affect the           
          application of section 453B.  See Utley v. Commissioner, 906 F.2d           
          1033 (5th Cir. 1990), vacating T.C. Memo. 1988-575.                         
          Claimed BTG Sale                                                            
               Petitioners claim that the Escondido property was sold to BTG          
          on July 30, 1985.  However, a grant deed conveying the Escondido            
          property to Balmac was recorded in the San Diego County recorder's          
          office on July 31, 1985.  And petitioner admitted that several of           
          the documents involved in the claimed section 351 transaction with          
          BTG--although dated July 30, 1985--were signed sometime after July          

                    SEC. 453B(f).  Obligation Becomes Unenforceable.--                
               For purposes of this section, if any installment                       
               obligation is canceled or otherwise becomes                            
                         (1) the obligation shall be treated as                       
                    if it were disposed of in a transaction other                     
                    than a sale or exchange, and                                      
                         (2) if the obligor and obligee are                           
                    related persons (within the meaning of                            
                    section 453(f)(1)), the fair market value of                      
                    the obligation shall be treated as not less                       
                    than its face amount.                                             

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