Timothy J. Coburn - Page 14

                                       - 14 -                                         
          � 3-118 (1998 & Supp. 2005).15  The foregoing demonstrates that             
          petitioner’s abandonment of the collateral, assuming the loan was           
          recourse, did not discharge petitioner from the loan during                 
          petitioner’s taxable year 2000.  CareMatrix would have until at             
          least April 15, 2006, to enforce payment on the loan if it is               
          recourse.  A taxpayer must recognize income from the discharge of           
          indebtedness where (1) a liability exists at the time of the                
          alleged discharge and (2) the taxpayer was in fact discharged               
          from such liability.  Babin v. Commissioner, 23 F.3d at 1034;               
          Waterhouse v. Commissioner, T.C. Memo. 1994-467.  In the instant            
          case, the loan default does not result in discharge of                      
          indebtedness income, assuming the loan was recourse, because                
          petitioner was never discharged from liability on the loan.                 
          Accordingly, we hold that petitioner realized no discharge of               
          indebtedness income with respect to the loan for petitioner’s               
          taxable year 2000.                                                          

               15In the instant case, the promissory note provides:  “This            
          Note shall be governed by and construed in accordance with the              
          laws of the Commonwealth of Massachusetts, to the maximum extent            
          the parties may so lawfully agree.”  Similarly, the stock pledge            
          agreement provides:  “This Agreement shall in all respects be               
          construed and interpreted in accordance with and governed by the            
          laws of the Commonwealth of Massachusetts.”  Consequently, the              
          laws of Massachusetts govern the interests and rights of the                
          parties with respect to these documents.  See Cook v.                       
          Commissioner, 80 T.C. 512, 520 (1983).  Mass. Gen. Laws ch. 106,            
          sec. 3-118 (2005), provides that an action to enforce payment of            
          a note must be commenced within 6 years after the due date stated           
          in the note.  As noted above, the promissory note provided for a            
          due date of Apr. 15, 2000.                                                  

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

Last modified: May 25, 2011