Timothy J. Coburn - Page 7

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          the loan was nonrecourse and that CareMatrix held the collateral.           
          CareMatrix took no further action to collect the outstanding                
          principal and interest on the loan from petitioner.  In an                  
          affidavit stipulated by the parties, Mr. Gosman stated that                 
          petitioner and CareMatrix “intended that, in the event of a                 
          default, repayment would be made only from the collateral and no            
          other source.”  Consequently, we conclude that petitioner                   
          abandoned the collateral upon his default.  Accordingly, we                 
          consider the Federal income tax consequences of petitioner’s                
          default on the loan and abandonment of the collateral.                      
               The parties in the instant case dispute whether the loan is            
          recourse or nonrecourse.7  The regulations under section 1001               
          distinguish between a debtor’s disposition of collateral in                 
          satisfaction of an underlying nonrecourse liability and a                   
          debtor’s disposition of collateral in satisfaction of an                    
          underlying recourse liability.8  Specifically, section 1.1001-              
          2(a), Income Tax Regs.,9 provides that the amount realized on the           

               7Respondent concedes that the loan constitutes bona fide               
               8Such a distinction may affect the character of any gain or            
          loss on the transaction and the availability of certain                     
          exclusions from gross income.  See secs. 1221, 108.                         
               9Sec. 1.1001-2, Income Tax Regs. Discharge of liabilities.--           
                    (a) Inclusion in amount realized. (1) In general.--               
               Except as provided in paragraph (a)(2) and (3) of this                 
               section, the amount realized from a sale or other                      

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