- 9 - 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.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
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