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affd. 881 F.2d 832, 835 (9th Cir. 1989); Beaver v. Commissioner,
T.C. Memo. 1980-429; see also sec. 1.357-2(a), Income Tax Regs.
Petitioners rely on two Court of Appeals decisions, in which
the Courts of Appeals granted taxpayers relief from recognizing a
gain under section 357(c). In Lessinger v. Commissioner, 872
F.2d 519 (2d Cir. 1989), revg. 85 T.C. 824 (1985), the difference
between the adjusted basis of the assets that were transferred
and the liabilities that were transferred to the corporation was
recorded as a loan receivable from the taxpayer to the
corporation. The Court of Appeals held that, “where the
transferor undertakes genuine personal liability to the
transferee, ‘adjusted basis’ in section 357(c) refers to the
transferee’s basis in the obligation, which is its face amount.”
Id. at 526. As a result of the inclusion of the face value of
the loan receivable in the adjusted basis of the assets that were
transferred, there was no gain to recognize under section 357(c).
See id.
In Peracchi v. Commissioner, 143 F.3d 487 (9th Cir. 1998),
revg. T.C. Memo. 1996-191, the difference between the adjusted
basis of the assets that were transferred and the liabilities
that were transferred to the corporation was recorded as a
personal note from the taxpayer to the corporation. The Court of
Appeals held that the taxpayer had a basis in the personal note
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