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Section 1001(b) provides that "The amount realized from the
sale or other disposition of property shall be the sum of any
money received plus the fair market value of the property (other
than money) received." Petitioners argue that under section
1.1001-1(g)(2), Income Tax Regs., Four A was entitled to report
the amount realized on the sale as the present value of the
productions payments to be made under the agreement.
In 1996, final regulations were issued providing a method
for calculating the amount realized from a contingent payment
debt instrument. Sec. 1.1001-1(g)(2), Income Tax Regs. Treasury
Decision 8674, explaining the final regulations, provides in
part:
For a contingent payment debt instrument issued
before August 13, 1996, a taxpayer may use any
reasonable method to account for the debt instrument,
including a method that would have been required under
the proposed regulations when the debt instrument was
issued. * * * [T.D. 8674, 1996-2 C.B. 84, 89.]
The agreement for the sale of the equipment was executed in
1993, before the effective date of the 1996 regulations.
Petitioners contend, as we understand it, that Four A received,
in exchange for the equipment, a contingent payment debt
instrument within the meaning of the regulations. Even if we
3(...continued)
issue was not included in the statutory notices of deficiency or
in the petitions. We find that the issue was tried by consent
pursuant to Rule 41(b)(1), and we consider it to be before the
Court.
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