-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
31.
5(...continued)
SEC. 453B(f). Obligation Becomes Unenforceable.--
For purposes of this section, if any installment
obligation is canceled or otherwise becomes
unenforceable--
(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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