Richard D. Frazier and Yvonne Frazier - Page 8

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               Respondent relies on Aizawa v. Commissioner, 99 T.C. 197               
          (1992), affd. without published opinion 29 F.3d 630 (9th Cir.               
          1994), for the proposition that the amount realized constitutes             
          the amount of the proceeds of the foreclosure sale, i.e., the               
          bid-in amount of the lender.  In Aizawa, the taxpayers owned                
          rental property which was subject to a recourse mortgage, and               
          upon default, the property was acquired by the mortgagee at a               
          foreclosure sale.  We held that the amount of the proceeds of the           
          foreclosure sale constituted the amount realized under section              
          1001(a).  Notwithstanding the similar facts and circumstances,              
          Aizawa is distinguishable from the instant case on one key                  
          matter.  In Aizawa, the amount that the lender paid for the                 
          property at the foreclosure sale was equal to the fair market               
          value of the property.  In Aizawa v. Commissioner, supra at 200-            
          201, the Court stated:                                                      
               It cannot be gainsaid that the property was sold for                   
               $72,700 (an amount which we have no reason to conclude                 
               did not represent the fair market value of the                         
               property) and that petitioners received, by way of a                   
               reduction in the judgment of the foreclosure, that                     
               amount and nothing more.  That is the "amount realized"                
               under section 1001(a) which is subtracted from                         
               petitioners' basis in order to determine the amount of                 
               their loss.  [Fn. ref. omitted; emphasis added.]                       
          In the instant case, we have clear and convincing proof to                  
          conclude that the bid-in price of the lender does not represent             
          the fair market value of the Dime Circle property.                          
               We note that this was not an arm's-length transaction                  

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