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v. Commissioner, supra. There is no evidence that the NBHA
considered the credit rating of Corbin West before agreeing to
accept the note. See Capek v. Commissioner, 86 T.C. 14, 48-49
(1986); Burns v. Commissioner, 78 T.C. 185, 212 (1982); Estate of
Helliwell v. Commissioner, 77 T.C. 964, 976-977, 987-988 (1981).
The NBHA never recorded the note as an asset on its financial
statements. At the time of trial, the NBHA could not locate the
note. See Patin v. Commissioner, 88 T.C. 1086 (1987), affd.
without published opinion 865 F.2d 1264 (5th Cir. 1989), affd.
without published opinion sub nom. Hatheway v. Commissioner, 856
F.2d 186 (4th Cir. 1988), affd. sub nom. Gomberg v. Commissioner,
868 F.2d 865 (6th Cir. 1989), affd. sub nom. Skeen v.
Commissioner, 864 F.2d 93 (9th Cir. 1989). The note was
subordinate to repayment of the preexisting debt and the
obligations to the partners, which greatly exceeded the
property's fair market value at the note's inception. The facts
in toto indicate that the NBHA did not expect the note to be
repaid and never treated the note as genuine debt.
On the basis of our review of the entire record, we hold
that there was no reasonable likelihood that Corbin West would
pay off the note; therefore, the note lacks economic substance
and is not includable in the property's basis. Accordingly,
Corbin West is not entitled to depreciation deductions or low-
income housing credits related to the note.
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