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collateral securing a recourse liability upon the debtor’s
default on the liability, alone, does not extinguish the
underlying liability. Lockwood v. Commissioner, 94 T.C. 252, 260
(1990). Unlike collateral securing a nonrecourse liability, the
collateral securing a recourse liability does not represent the
only source of repayment.13 In the instant case, the loan
documents provide CareMatrix with the right to enforce
petitioner’s repayment of the loan, irrespective of whether
petitioner abandoned the collateral to CareMatrix.14
13Black’s Law Dictionary 1086 (7th ed. 1999) provides the
following definitions of a recourse note and a nonrecourse note:
recourse note. A note that may be satisfied upon
default by pursuing the debtor’s other assets in
addition to the collateral securing the note. Cf.
nonrecourse note.
nonrecourse note. A note that may be satisfied upon
default only by means of the collateral securing the
note, not by the debtor’s other assets. Cf. recourse
note.
14We recognize, and petitioner does not dispute, that the
terms of the loan documents on their face provide for a recourse
liability. Petitioner instead contends that the loan is
nonrecourse based upon two alternative contentions. The first
contention is that the substance rather than the form of the
transaction should govern and that the underlying facts and
circumstances support the conclusion that the loan is
nonrecourse. Alternatively, petitioner contends that the parties
intended for the loan to be nonrecourse, that the parties made a
mutual mistake in executing a promissory note that did not
accurately reflect their intent, and that the terms of the loan
documents should be reformed to accurately reflect such intent.
Petitioner contends that petitioner “transferred” the collateral
to CareMatrix in satisfaction of a nonrecourse liability, that
the “transfer” of the collateral is properly treated as the sale
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