Michael Correra - Page 5

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            a result of the sale or disposition."  And it follows from                                   
            Helvering v. Hammel, 311 U.S. 504, 506-511 (1941), that a seizure                            
            or any other involuntary transfer qualifies as a "disposition" of                            
            the property.                                                                                
                  On April 11, 1991, as a result of petitioner's default on                              
            the mortgage notes, the FDIC took possession of the quitclaim                                
            deed executed by petitioner.  On November 12, 1991, the FDIC                                 
            executed a Mortgage Discharge in connection with the property.                               
            Petitioner owed Capitol Bank $3,600,000 at that time.  The entire                            
            amount was forgiven by the Mortgage Discharge.                                               
                  This Court has held that when a taxpayer surrenders property                           
            in exchange for cancellation of a debt, the transaction may be                               
            characterized, in whole or part,2 as a sale or exchange of                                   
            property rather than a cancellation of indebtedness.  Danenberg                              
            v. Commissioner, 73 T.C. 370, 380-381 (1979).  The Court relied                              
            upon R. O'Dell & Sons Co., Inc. v. Commissioner, 8 T.C. 1165,                                
            1167 (1947), affd. 169 F.2d 247 (3d Cir. 1948), where the problem                            
            was analyzed as follows:                                                                     
                  If an owner sells property for more than its basis, the                                
                  assumption that there has been a taxable gain follows almost                           
                  inevitably.  This is as true where the consideration                                   
                  received is property as where it is cash.  Sometimes, the                              
                  transaction involves an atypical sort of consideration such                            

                  2  No issue is presented here involving the problem dealt                              
            with in Gehl v. Commissioner, 102 T.C. 784, 786-787 (1994), affd.                            
            without published opinion 50 F.3d 12 (8th Cir. 1995) where the                               
            recourse indebtedness canceled exceeded the value of the property                            
            surrendered.                                                                                 




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