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1001(a). Petitioner disputes whether the amount of the Note is
included in the amount realized, given the fact that she was not
personally liable on it.
The amount of the Note is included in the amount realized on
the residence's sale. The amount realized on a sale is computed
by adding the amount of money received to the fair market value
of other property received. Sec. 1001(b). Any liability, let it
be recourse or nonrecourse, that attaches to the subject property
is included in the amount realized to the extent that the
liability is discharged by the sale. Crane v. Commissioner,
331 U.S. 1, 12-14 (1947); sec. 1.1001-2(a)(1), Income Tax Regs.
As to the Note, the amount thereof is included in the amount
realized because, even though petitioner was not personally
liable on it at the time she sold the residence, First Northwest
had a legally enforceable right to receive, and actually did
receive, proceeds from the sale equal to the amount that it was
owed under the Note. In re Isom, 901 F.2d 744 (9th Cir. 1990);
see also Long v. Bullard, 117 U.S. 617 (1886).
In sum, the amount realized on the sale of the residence was
$131,737, and petitioner’s basis therein was $38,000. Given the
additional fact that petitioner may take into account the $1,349
of legal fees, we hold that petitioner realized, and must
recognize in 1991, a gain of $92,388 on the residence's sale.
As to the accuracy-related penalty, petitioner has not
addressed this issue on brief. As applicable herein, section
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