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prudently abandon. This is the stuff of substance. It
meshes with the form of the transaction and constitutes
a sale.
No such meshing occurs when the purchase price
exceeds a demonstrably reasonable estimate of the fair
market value. Payments on the principal of the
purchase price yield no equity so long as the unpaid
balance of the purchase price exceeds the then existing
fair market value. Under these circumstances the
purchaser by abandoning the transaction can lose no
more than a mere chance to acquire an equity in the
future should the value of the acquired property
increase. * * *
In addition, even a purportedly recourse purchase note will
not be treated as true debt where payment, according to its
terms, is too contingent. See Waddell v. Commissioner, 86 T.C.
848, 901-903 (1986), affd. 841 F.2d 264 (9th Cir. 1988).
Further, the mere labeling of a purchase note as recourse is not
controlling because substance, not form, must govern. The note's
recourse label thus will not preclude inquiry into the adequacy
of the collateral securing an alleged purchase money debt. See
generally Waddell v. Commissioner, supra at 901-903.
In Ferrell v. Commissioner, 90 T.C. 1154, 1186 (1988), this
Court held not to be bona fide debt for tax purposes certain
purportedly long-term recourse notes that allegedly had been
assumed by limited partner-investors, and elaborated as follows:
We are fully aware of the long line of decisions
of this Court and other courts that have dealt with
bona fide long-term recourse notes assumed by limited
partners. In those cases, the courts have given
credence to recourse notes as a basis for supporting
claimed losses or establishing section 465 "at risk"
amounts. See, e.g., Pritchett v. Commissioner, 827
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