Richard William Corduan - Page 5




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          under section 61(a)(3).  See id.; sec. 1001; sec. 1.1001-2,                 
          Income Tax Regs.  The excess of the amount of the discharged                
          recourse indebtedness over the fair market value is DOI income              
          includable under section 61(a)(12).  See sec. 1.1001-2(a)(2) and            
          (c) Example (8), Income Tax Regs.                                           
               A piece of equipment (a “Bobcat”) was purchased by                     
          petitioner, a friend of petitioner, and petitioner’s father for             
          use in the friend’s business.  A financing statement was filed              
          naming petitioner as a debtor on a loan secured by the Bobcat and           
          other property.  In 1995, the Bobcat was repossessed by the                 
          creditor which financed the purchase, Associates Commercial                 
          Corporation (Associates), formerly Clark Credit Corporation.  A             
          Form 1099-A, Acquisition or Abandonment of Secured Property, was            
          issued to petitioner in 1995.  This form reflects an outstanding            
          principal balance of $18,581 on a recourse debt, and the Bobcat’s           
          fair market value of $12,575.  For several months after receiving           
          the form, petitioner attempted to make payments for the Bobcat.             
          He then retained the services of an attorney in order to advance            
          his argument that he never signed a contract regarding the                  
          purchase of the Bobcat and that he did not own it.  On February             
          14, 1996, a Release of All Claims and Indemnification Agreement             
          was executed by Associates.  Pursuant to this agreement,                    
          Associates agreed to release petitioner and his father from any             
          claim based on the Bobcat sales contract.  Petitioner paid                  






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