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nonrecourse debt in exchange for a cash payment of $11,114,027 of
which only $177,495 was from petitioner's own funds and the
remaining $10,936,532 was the proceeds from the sale to Dan
Associates. We disagree. We recognized in Gershkowitz that the
tax consequences from the discharge of nonrecourse debt depend
upon whether the mortgagor transfers or retains the property
securing the debt and, accordingly, analyzed the tax consequences
of each debt separately. The taxpayers in Gershkowitz discharged
the two loans in independent settlements, in one of which the
taxpayers retained the encumbered property and in the other of
which they did not.
Petitioner would have us treat the cash sale and the
discharge of the loans as two independent events. The record
before us, however, is replete with evidence that both loans were
discharged as a result of a single transaction involving the sale
of encumbered property. NCNB conditioned the discharge of the
loans upon the sale of the property, and Dan Associates
conditioned the purchase upon that discharge. At the end of the
day, NCNB had the proceeds from the sale, Dan Associates had the
property, and Briarpark was relieved of the entire balance of the
loans. In the foregoing context, the arrangements among NCNB,
Dan Associates, and Briarpark embodied a single transaction to
sell the property securing the loans. Accordingly, we must
conclude that Gershkowitz is not dispositive in the instant case.
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