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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.
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