- 10 - loan is nonrecourse, we conclude that any income realized by petitioner on the abandonment of the collateral in satisfaction of the loan is properly treated for Federal income tax purposes as a gain on the sale or other disposition of the collateral rather than discharge of indebtedness income. Id.; see sec. 1.1001-2(a)(1), Income Tax Regs. Accordingly, we would hold that petitioner realized no discharge of indebtedness income in 2000 were we to assume that the underlying liability is nonrecourse. As noted above, respondent’s trial memorandum and opening brief contend that the default resulted in discharge of indebtedness income to petitioner in 2000. Respondent’s reply brief surprisingly contends, for the first time, that petitioner is alternatively liable for gain in the amount of $750,000, representing an amount realized of $750,000 and a basis of zero. However, respondent does not offer any evidence to support respondent’s contention of a zero basis, and the record contains no such evidence. Under such circumstances, respondent is prohibited from raising such an issue for the first time on brief. See Smalley v. Commissioner, 116 T.C. 450, 456 (2001). Petitioner would be prejudiced were we to consider such an issue. Indeed, we note that respondent objected to petitioner’s motion for leave to supplement the evidentiary record with evidence of the value and basis of the collateral, filed after respondent’s new argument in respondent’s reply brief, which motion we denied.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
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