- 24 -
necessarily extinguished. The possibility of a deficiency
judgment against the debtor exists based on the recourse nature
of the debt obligation, and the amount of the gain or loss cannot
be fixed until the foreclosure sale takes place. Commissioner v.
Green, 126 F.2d 70, 71-72 (3d Cir. 1942); Aizawa v. Commissioner,
99 T.C. 197, 200-202 (1992), affd. without published opinion 29
F.3d 630 (9th Cir. 1994); Lockwood v. Commissioner, 94 T.C. 252,
260 (1990).
Petitioners do not sufficiently appreciate the nonrecourse
nature of L&C Springs' $2,250,000 debt obligation and the many
facts in these cases indicating that, certainly by November of
1990, all of the individuals and entities associated with this
transaction treated L&C Springs, for all purposes other than tax,
as having no continuing viable ownership interest in the L&C
Properties.
Petitioners fail to take into account that, under the
collateral agreement, L&C Springs expressly waived any right of
redemption. Further, petitioners have not cited any Florida law
that would provide that a mere holder of a leasehold interest in
buildings and improvements would have a right of redemption
following a foreclosure sale of the underlying land.
In summary, although the October 1990 Agreement was between
Tanglewood and Cal Fed, the individuals in control of Tanglewood
were also in control of L&C Springs. Under the October 1990
Agreement, Cal Fed was given control and management of the L&C
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