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indebtedness.” Id. at 89. In addition, we described the manner
in which this precept was to be employed in a discharge setting,
as follows:
When an obligation is highly contingent and has no
presently ascertainable value, it cannot refinance or
substitute for the discharge of a true debt. The very
uncertainty of the highly contingent replacement
obligation prevents it from reencumbering assets freed
by discharge of the true debt until some indeterminable
date when the contingencies are removed. In a word,
there is no real continuation of indebtedness when a
highly contingent obligation is substituted for a true
debt. Consequently, the rule in Kirby Lumber applies,
and gain is realized to the extent the taxpayer is
discharged from the initial indebtedness. [Id.]
The original debt in Zappo v. Commissioner, supra at 90, had
been characterized by a fixed amount, a stated rate of interest,
and a due date certain. The replacement liability was for an
amount that could not be ascertained until the end of 5 years,
did not bear interest, and would be credited with amounts paid by
a third party. See id. In those circumstances, we held that
the foregoing rule precluded treatment of the new obligation as
replacement indebtedness. See id.; see also Carolina,
Clinchfield & Ohio Ry. v. Commissioner, supra.
Turning to the matter at bar, we believe that the precedent
discussed above counsels a finding that petitioners’ indebtedness
to FmHA was discharged in 1996, for the simple reason that
whether and when petitioners would ever be required to make any
further payments to FmHA rested totally within their own control.
If petitioners chose to sell their property within 10 years from
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