Richard D. Frazier and Yvonne Frazier - Page 7

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          (5th Cir. 1989), affg. T.C. Memo. 1988-72; Killingsworth v.                 
          Commissioner, 864 F.2d 1214, 1216 (5th Cir. 1989), affg. 87 T.C.            
          1087 (1986); Boynton v. Commissioner, 649 F.2d 1168, 1172 (5th              
          Cir. 1981), affg. 72 T.C. 1147 (1977); Swaim v. United States,              
          651 F.2d 1066, 1069-1070 (5th Cir. 1981); Kuper v. Commissioner,            
          533 F.2d 152, 155-156 (5th Cir. 1976), affg. in part and revg. in           
          part 61 T.C. 624 (1974); Horn v. Commissioner, 90 T.C. 908, 939             
          (1988); Price v. Commissioner, 88 T.C. 860, 884 (1987); Capek v.            
          Commissioner, 86 T.C. 14, 47 (1986); Forseth v. Commissioner, 85            
          T.C. 127, 164 (1985), affd. 845 F.2d 746 (9th Cir. 1988);                   
          Houchins v. Commissioner, 79 T.C. 570, 589-590 (1982).  In a case           
          such as this, where the transaction is so disparate from the                
          actual substance and economic realities of the situation, we are            
          empowered, and in fact duty-bound, to look behind the transaction           
          in order to apply the Internal Revenue Code accurately.  Forseth            
          v. Commissioner, supra at 164 (citing Saviano v. Commissioner,              
          765 F.2d 643, 654 (7th Cir. 1985), affg. 80 T.C. 955 (1983)).               
               The facts of the instant case are analogous to those                   
          provided in an example in the regulations.  Section 1.1001-2(c),            
          Example(8), Income Tax Regs., provides as follows:                          
               In 1980, F transfers to a creditor an asset with a fair                
               market value of $6,000 and the creditor discharges                     
               $7,500 of indebtedness for which F is personally                       
               liable.  The amount realized on the disposition of the                 
               asset is its fair market value ($6,000).  In addition,                 
               F has income from the discharge of indebtedness of                     
               $1,500 ($7,500 - $6,000).                                              





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