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$981,406.48. Thus, petitioners say, no gain is to be recognized
under section 357(c)(1).
2. Since petitioners undertook genuine personal liability
for the excess of the unpaid principal balance of the Standard
Insurance Note over the adjusted basis in the 5118 Clinton Way
buildings and improvements, no gain should be recognized by
petitioners under section 357(c) of the Internal Revenue Code.
3. Under section 1012 of the Code, petitioners' basis in
the Capital Note was $1,060,000, its face amount.
4. Alternatively, under section 1012 of the Internal
Revenue Code, NAC Corporation's basis in the Capital Note was
$1,060,000, its face amount.
All of petitioners' arguments presuppose that the Capital
Note represents genuine indebtedness. Since we do not agree that
it does, we need not address the various convoluted approaches
petitioners ask us to take to arrive at the conclusion that they
are not required to recognize gain under section 357(c). Nor
need we address such nettlesome questions as whether a taxpayer's
unsecured promissory note can ever constitute "property" for
purposes of section 357(c)(1) and related Code sections, and
whether such an instrument has a basis for purposes of section
1012, and, if so, the amount thereof. See Lessinger v.
Commissioner, 872 F.2d 519 (2d Cir. 1989), revg. 85 T.C. 824
(1985), Alderman v. Commissioner, 55 T.C. 662 (1971).
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