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essential in this case. Whether collectors on claims are
“sellers” or “purchasers” in prior transactions is a matter which
was irrelevant in Nahey and which is irrelevant in this case,
where the taxpayer is entitled to and receives proceeds in
collection of a claim or in the settlement of a lawsuit. Indeed,
as in Nahey v. Commissioner, supra at 266 n.4, our focus is on
the receipt of settlement proceeds, not on prior or intervening
transactions. See also Nahey v. Commissioner, 196 F.3d at 868-
869; Pounds v. United States, supra at 349; Fahey v.
Commissioner, 16 T.C. 105, 108 (1951).
On the basis of the statutory mandate of section 1222(3),
and our recent opinion in Nahey v. Commissioner, 111 T.C. 256
(1998), we conclude that the settlement of the lawsuit in this
case was not a sale or exchange.8 Accordingly, the proceeds
originating from the settlement of the lawsuit were not received
in a sale or exchange.
Petitioners argue that the holding in Nahey v. Commissioner,
111 T.C. 256 (1998), is not applicable to this case, because they
8In Helvering v. William Flaccus Oak Leather Co., 313 U.S.
247, 251 (1941), the Court stated: “Congress has expressly
specified the ambiguous transactions which are to be regarded as
sales or exchanges for income tax purposes.” Implicit in this
statement is that certain ambiguous transactions are not
considered sales or exchanges unless expressly specified by
Congress. Congress has identified several transactions which are
to be regarded as sales or exchanges. See, e.g., secs. 302,
1234(a)(1) and (2), 1234A, 1241, 1271(a)(1). However, Congress
has not identified the settlement of a lawsuit as a sale or
exchange for capital gain purposes.
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