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OPINION
Issue 1. Amount Realized on Foreclosure Sale
Respondent determined that petitioners realized $571,179 on
the foreclosure sale of the Dime Circle property, which
represents the amount bid in by the lender. Petitioners assert
that the amount realized on the foreclosure sale is determined by
the fair market value of the property, which is different from
the amount bid in by the lender. We agree with petitioners.
In general, the transfer of property in consideration of the
discharge or reduction of indebtedness is equivalent to the sale
of property upon which gain or loss is realized. E.g., Gehl v.
Commissioner, 102 T.C. 784, 785 (1994), affd. without published
opinion 50 F.3d 12 (8th Cir. 1995); Danenberg v. Commissioner, 73
T.C. 370, 380-381 (1979); Estate of Delman v. Commissioner, 73
T.C. 15, 28 (1979); Bialock v. Commissioner, 35 T.C. 649, 660
(1961); Marcaccio v. Commissioner, T.C. Memo. 1995-174. The
amount of gain realized is the excess of the amount realized over
the taxpayer's adjusted basis in the property, and the amount of
loss realized is the excess of the adjusted basis over the amount
realized. Sec. 1001(a).
For purposes of computing gain or loss, the "amount
realized" is defined by section 1001(b) as the sum of any money
received plus the fair market value of the property received.
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