Richard D. Frazier and Yvonne Frazier - Page 10

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          asserting that a revenue ruling has limited precedential value              
          for a court.  While we agree that a revenue ruling is not binding           
          on the Court, Stubbs, Overbeck & Associates, Inc. v. United                 
          States, 445 F.2d 1142, 1146-1147 (5th Cir. 1971), a bifurcated              
          analysis of the tax consequences for petitioners is appropriate             
               As discussed above, petitioners' gain or loss on their                 
          disposition of the Dime Circle property is computed pursuant to             
          section 1001 and, as a general rule, the amount realized includes           
          the full amount of the remaining debt.  Sec. 1.1001-2(a)(1),                
          Income Tax Regs.  However, section 1.1001-2(a)(2), Income Tax               
          Regs., provides an exception for recourse liabilities.  The                 
          regulation states that                                                      
               The amount realized on a sale or other disposition of                  
               property that secures a recourse liability does not                    
               include amounts that are (or would be if realized and                  
               recognized) income from the discharge of indebtedness                  
               under section 61(a)(12). * * *                                         
               This regulation effectively bifurcates the instant                     
          transaction into a taxable transfer of property and a taxable               
          discharge from indebtedness.  Cf. Michaels v. Commissioner, 87              
          T.C. 1412, 1415 (1986).  Thus, according to the regulation, each            
               should be treated as a separate transaction for tax                    
          purposes.2  Id.                                                             

               2    For a complete review of the bifurcation approach, see            
          Cunningham, "Payment of Debt with Property--The Two-Step Analysis           

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