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the excess of the face value of the obligation over an amount
equal to the income which would be returnable were the obligation
satisfied in full. Sec. 453B(b). Any gain or loss recognized
shall be considered as resulting from the sale or exchange of the
property in respect of which the installment obligation was
received. Sec. 453B(a) (flush language).
Respondent determined that the assignment by petitioner to
Charles Medlin was a sale of an installment obligation under
section 453B(a) and that petitioner recognized a gain of $30,925
in 1985.15 Petitioner argues that the assignment of the mortgage
to his father was not a sale but that it was pledged as
collateral for a loan.
At trial, petitioner testified as follows:
Q All right. Would you explain what transpired in
relation to this mortgage and how you dealt with the
mortgage in relation to your father?
A From the sale of the property, there was down
payment for cash. And then the mortgage, we took out
the mortgage. And the guy would make payments; I
believe they were annual payments, or maybe monthly;
I’m not sure. Anyway, he was going to make payments,
but I needed some money.
And my father, again, he was mainly a go-put-his-
money-in-the-bank; he wasn’t interested in real estate
deals or anything, and I was probably sitting around
moaning to him about the interest I was paying to other
people like Mr. Margolis and things like that; he
expressed an interest in--why didn’t I give him some of
15Respondent computed the gain from the purported sale of
the installment obligation as follows: Gain from sale of
installment obligation ($30,925) = face value of the obligation
sold ($36,000) x gross profit percentage (0.859014).
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