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same issue in similar circumstances. The taxpayer transferred
all of the assets and liabilities of a sole proprietorship to a
corporation in which he owned 100 percent of the outstanding
stock. The liabilities exceeded the adjusted basis of the assets
that were transferred, and the taxpayer remained personally
liable for the liabilities that were transferred to the
corporation. We stated that, “While the * * * [taxpayer]
nevertheless remained personally liable for the payment of such
liabilities, * * * there is no requirement in section 357(c)(1)
that the transferor be relieved of liability” and held that the
taxpayer had to recognize a gain under section 357(c) to the
extent that the liabilities that were assumed by the corporation,
or the liabilities to which the property that was transferred
might be subject, exceeded the taxpayer’s basis for the assets
that were transferred. Id. at 18-19.
Since the decision in Rosen, the Court has consistently held
that, even if the taxpayer remains liable on the transferred
debt, the taxpayer must recognize a gain under section 357(c) to
the extent that the sum of the amount of the liabilities that
were assumed, plus the amount of the liabilities to which the
property was subject, exceeds the taxpayer’s adjusted basis in
the assets that were transferred. See Smith v. Commissioner, 84
T.C. 889, 909 (1985), affd. without published opinion 805 F.2d
1073 (D.C. Cir. 1986); Owen v. Commissioner, T.C. Memo. 1987-375,
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