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the Chevrolet debt and that the payments made by HJA on the
Chevrolet debt were taxable as ordinary income to Henry in the
years determined by respondent and were deductible by HJA.
D. Alternative Arguments
Relying upon Landreth v. Commissioner, 50 T.C. 803 (1968),
Henry and Esther argue that whether a person is a primary obligor
or an accommodation party depends on whether the person, because
of the loan, “receives a nontaxable increase in assets” at the
time of the distribution of the loan proceeds. Henry and Esther
also cite Payne v. Commissioner, T.C. Memo. 1998-227, revd. on
other grounds 224 F.3d 415 (5th Cir. 2000), and Whitmer v.
Commissioner, T.C. Memo. 1996-83, in support of their argument
that “the repayment of debt that one-–as a guarantor or other
contingent liability debtor-–did not receive the actual benefit
of is not taxable income to the non-benefitting contingent
liability debtor.” Henry and Esther’s argument based on these
cases is misplaced.
Our decisions in Landreth v. Commissioner, supra, Payne v.
Commissioner, supra, and Whitmer v. Commissioner, supra, are
distinguishable. In Landreth, Payne, and Whitmer, the taxpayers
were guarantors, not primary obligors. Because the taxpayer in
each case was a guarantor, we held that the taxpayer did not
receive discharge of indebtedness income when the liabilities he
had guaranteed were discharged.
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