- 99 -
of cases should be based upon the purchase prices of the
properties as opposed to the principal amounts of the
notes. See Brannen v. Commissioner, 722 F.2d at 513
(Chabot, J., concurring). Therefore, as framed by the
parties, the first issue in these cases is whether the
principal amount of the first mortgage notes issued by
each partnership unreasonably exceeds the value of the
properties securing the notes.
Petitioners argue that "the fair market value of the
properties [purchased by each partnership] was at least
equal to the amount of the debt at the time it was
incurred." They argue that the fair market value of
each of the subject properties is its contract price, as
established by a contemporaneous appraisal that was made
by an independent, unrelated appraiser. The appraisals
reflect the sale of each property to an individual buyer,
rather than the bulk sale of all of the properties to a
single buyer. Petitioners argue that the promissory note
issued to purchase each of the properties, based upon 85
to 95 percent of the contract price, is bona fide
indebtedness.
Petitioners emphasize that "each of the nonrecourse
mortgages in the partnerships was insured by an unrelated
Page: Previous 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 NextLast modified: May 25, 2011