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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
nonrecourse.11
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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