Robert K. & Dawn E. Lowry - Page 6

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          will not be deemed to discharge the indebtedness immediately if             
          the cancellation is contingent upon future events.  Walker v.               
          Commissioner, 88 F.2d 170 (5th Cir. 1937), affg. White v.                   
          Commissioner, 34 B.T.A. 424 (1936); Jelle v. Commissioner, 116              
          T.C. 63, 68 (2001).                                                         
               We have consistently held that "With respect to real                   
          property, sale or transfer of ownership is complete upon the                
          earlier of the passage of legal title or the practical assumption           
          of the benefits and burdens of ownership."  Keith v.                        
          Commissioner, 115 T.C. 605, 611 (2000), and cases cited therein.            
          In the instant case, there is no dispute that the passage of                
          legal title occurred in 1994.  Furthermore, the record is devoid            
          of any evidence that AAL assumed any benefit or burden of                   
          ownership of the Fitch property before the passage of legal                 
          title.  For these reasons, we hold that the partnership's                   
          cancellation of debt provided for by the covenant not to sue was            
          recognized on May 27, 1994.  Accordingly, we shall deny                     
          petitioners' motion for partial summary judgment and grant                  
          respondent's cross-motion.                                                  
               Petitioners argue that the statement contained in the                  
          examination report attached to respondent's 30-day letter that              
          the building was surrendered in 1993 constitutes an admission               
          that respondent found as fact that the surrender occurred in                
          1993.  Petitioners' reliance on the 30-day letter amounts to a              

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