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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
here.
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
(continued...)
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