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As we held in Coburn I, regardless of whether the liability
in the instant case is nonrecourse or recourse, petitioner’s
default on the loan and abandonment of the collateral in 2000 did
not result in petitioner’s realizing discharge of indebtedness
income in 2000. In Coburn I, we held that, if the loan were
nonrecourse, any income realized upon petitioner’s loan default
and abandonment of collateral in satisfaction of the liability
would constitute gain on the sale or other disposition of the
collateral pursuant to section 1001(a) rather than discharge of
indebtedness income. See L&C Springs Associates v. Commissioner,
188 F.3d 866, 868 (7th Cir. 1999), affg. T.C. Memo. 1997-469;
sec. 1.1001-2(a)(1), Income Tax Regs. We also held,
alternatively, that, if the loan were recourse, petitioner’s loan
default and abandonment of collateral, alone, would not discharge
the underlying liability because the collateral would not
represent the only source of repayment of the loan. See Lockwood
v. Commissioner, 94 T.C. 252, 260 (1990).
Moreover, in Coburn I, we held that, regardless of whether
the liability is nonrecourse or recourse, the absence of action
by CareMatrix to collect the liability in the year of default did
not result in petitioner’s realizing discharge of indebtedness
income in 2000. With respect to nonrecourse indebtedness, the
liability was satisfied upon petitioner’s abandonment of the
collateral to CareMatrix. See L&C Springs Associates v.
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