Richard D. Frazier and Yvonne Frazier - Page 9

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          between a willing buyer and a willing seller, neither being under           
          compulsion to buy or sell and both having reasonable knowledge of           
          relevant facts.  See United States v. Cartwright, 411 U.S. 546,             
          551 (1973); United States v. Simmons, 346 F.2d 213, 217 (5th Cir.           
          1965); Frazee v. Commissioner, 98 T.C. 554, 562 (1992); see also            
          sec. 1.170A-1(c)(2), Income Tax Regs.  The amount bid in by a               
          lender at a foreclosure sale may be arbitrary.  As petitioners              
          stated on brief, there are many possible reasons why a lender               
          would bid in higher than the fair market value, such as if the              
          lender believed it would be unable to collect a deficiency                  
          judgment because the debtor is contemplating bankruptcy, or                 
          simply to erase the loss from its books.  See, e.g., Securities             
          Mortgage Co. v. Commissioner, 58 T.C. 667, 669-670 (1972).                  
          However, we need not determine the intent of the lender in                  
          formulating the bid-in price.  We are satisfied that the bid-in             
          price did not represent the fair market value of the Dime Circle            
          property.  We find that the fair market value of the Dime Circle            
          property on August 1, 1989, was $375,000.  Accordingly,                     
          petitioners realized $375,000 on the disposition of the Dime                
          Circle property.                                                            
               We must now determine the Federal income tax consequences of           
          this transaction for petitioners.  Petitioners rely on Rev. Rul.            
          90-16, 1990-1 C.B. 12, and argue for bifurcation of the                     
          transaction.  Respondent argues against his own revenue ruling,             

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