- 15 - the decision of the U.S. Court of Appeals for the Ninth Circuit (the court to which this case would normally be appealed) in Owen v. Commissioner, 881 F.2d 832 (9th Cir. 1989), affg. T.C. Memo. 1987-375. In Owen, taxpayer was an equal partner with McEachron in McO, a general partnership engaged in the seismic drilling business. In 1980, the partners borrowed money to buy drilling equipment, secured the loan by the equipment, gave their personal guaranties to the lender, and placed title to the equipment in McO. In 1981 the partnership transferred the equipment to the partners' wholly owned corporation, at which time the indebtedness secured by the assets exceeded the assets' adjusted basis. The Ninth Circuit affirmed our holding that section 357(c)(1) applied. The court held that "'So long as the transferred property remains liable on the debt, then, such debt can be a section 357(c) liability even if the * * * [taxpayer] retained personal, unrelieved liability on it.'" 881 F.2d at 835, quoting Smith v. Commissioner, 84 T.C. 889, 909 (1985), and citing additional decisions to the same effect. In the case before us, the Standard Insurance Note was secured by the deed of trust encumbering the Clinton Way Property, and in the event of a default by NAC Corporation, Standard Insurance would unquestionably have looked in the first instance to the Clinton Way Property, the security under thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011