R. Edwin Brown and Winsome S. Brown - Page 10

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               Generally, gain or loss from the disposition of property is            
          measured by the amount realized less the adjusted basis of the              
          property.  Sec. 1001(a).  The amount realized from the sale or              
          other disposition of property is defined as money received plus             
          the fair market value of any property received.  Sec. 1001(b).              
          Furthermore, the amount realized generally includes the amount of           
          liabilities from which the transferor is discharged as a result             
          of the sale or disposition.  Sec. 1.1001-2(a), Income Tax Regs.             
          An exception to this rule applies if the liability was incurred             
          by reason of the acquisition of the property but such liability             
          was not taken into account in determining the transferor’s basis            
          for the property.  Sec. 1.1001-2(a)(3), Income Tax Regs.; see               
          also Brown-Forman Corp. v. Commissioner, 94 T.C. 919, 940 (1990),           
          affd. 955 F.2d 1037 (6th Cir. 1992); cf. Mendham Corp. v.                   
          Commissioner, 9 T.C. 320 (1947); Lutz & Schramm Co. v.                      
          Commissioner, 1 T.C. 682 (1943).                                            
               When a nonrecourse liability is at issue, a discharge of               
          the liability occurs when there is a sale or other disposition of           
          the property that secures the nonrecourse liability.  Sec.                  
          1.1001-2(a)(4)(i), Income Tax Regs.  A charitable contribution of           
          property can be treated as a sale or exchange.  Guest v.                    
          Commissioner, 77 T.C. 9, 25 (1981); sec. 1.1011-2(a)(3), Income             
          Tax Regs.                                                                   
               Both parties cite Commissioner v. Tufts, 461 U.S. 300                  
          (1983), in their arguments.                                                 

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