Roderick E. Carlson and Jeanette S. Carlson - Page 36




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          determined that value to be.  Nonetheless, according to petition-           
          ers, “there was no capital gain” when the Yantari was sold at the           
          foreclosure sale.  We reject petitioners’ position.  It is well             
          established that, absent clear and convincing proof to the                  
          contrary, the sale price of property at a foreclosure sale is               
          presumed to be its fair market value.  See, e.g., Frazier v.                
          Commissioner, 111 T.C. 243, 246 (1998); Community Bank v. Commis-           
          sioner, 79 T.C. 789, 792 (1982), affd. 819 F.2d 940 (9th Cir.               
          1987).  Petitioners have presented no evidence, let alone clear             
          and convincing evidence, that the $95,000-sale price of the                 
          Yantari at the foreclosure sale was not its fair market value.              
               Furthermore, section 1001(a) provides that gain from a sale            
          or other disposition of property is the excess of the amount                
          realized therefrom over the adjusted basis provided in section              
          1011 for determining gain.  The regulations under section 1001              
          provide guidance to taxpayers in applying section 1001(a) to                
          facts that are analogous to the facts presented in the instant              
          case.  Example (8) of section 1.1001-2(c), Income Tax Regs.                 
          (Example (8)),16 states:                                                    

               16Example (8) applies to the discharge of indebtedness that            
          is recourse in nature.  While the parties did not expressly                 
          stipulate that petitioners’ loan to finance the purchase of the             
          Yantari constituted recourse debt, we infer from certain other              
          stipulations of the parties that that loan was recourse debt.               
          The parties stipulated that the foreclosure sale resulted in both           
          DOI income and capital gain, although petitioners dispute whether           
          they must recognize that DOI income.  DOI income and capital gain           
                                                             (continued...)           





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