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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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