Timothy J. Coburn - Page 9

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          exceeds its basis and, to the extent that the liability exceeds             
          the property’s fair market value, discharge of indebtedness                 
          income is realized.  Frazier v. Commissioner, 111 T.C. 243, 245             
          (1998); sec. 1.1001-2(c), Income Tax Regs.                                  
               In the instant case, petitioner contends that the loan is              
          nonrecourse.  As to the recourse nature of the loan, respondent             
          is not of one mind.  Respondent’s trial memorandum refers to the            
          liability on the loan as nonrecourse.  Respondent’s opening brief           
          contends that the Federal income tax result in the instant case             
          does not depend on whether the loan is recourse or nonrecourse.             
          Respondent’s reply brief, however, contends that the loan is                
          recourse.  For the reasons discussed below, we conclude that                
          petitioner’s abandonment of the collateral did not result in                
          discharge of indebtedness income to petitioner during                       
          petitioner’s taxable year 2000, regardless of whether the                   
          liability underlying the promissory note is recourse or                     
               As stated above, a debtor’s abandonment of collateral in               
          satisfaction of a nonrecourse liability is treated for Federal              
          income tax purposes as a sale of the collateral pursuant to                 
          section 1001(a).  L&C Springs Associates v. Commissioner, supra             
          at 868.  Consequently, in the instant case, assuming that the               

               11Consequently, we need not decide whether the loan is                 
          recourse or nonrecourse.                                                    

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