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abandonment of the property in 1987. Accordingly, we are
satisfied that Briarpark did not realize COI income of $9,200,000
in 1987.
Having found that Briarpark discharged the loans as a result
of the sale in 1989, we turn to consider the effect of that
determination upon the characterization of Briarpark's income.
The amount realized on the sale, exchange, or disposition of
property encumbered by nonrecourse debt includes the entire
balance of the obligation. Commissioner v. Tufts, supra; Crane
v. Commissioner, 331 U.S. 1 (1947); Lockwood v. Commissioner, 94
T.C. 252 (1990). In this case, section 61(a)(12) has no
application to a sale or exchange of property subject to
nonrecourse liabilities. Estate of Delman v. Commissioner, 73
T.C. 15 (1979).
In sum, we hold that the disposition of the property
constitutes a sale or exchange for purposes of section 1001 and
the regulations thereunder and that the income Briarpark realized
must be characterized as gain derived from dealings in property
under section 61(a)(3). We have considered all of the other
arguments and, to the extent we have not addressed them, find
them to be without merit.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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