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and remedies under the Note and abandoned the collateral in 2000.
Such abandonment was the ‘identifiable event’ that made it clear
[petitioner] would not have to repay his obligation to
* * * [CareMatrix]. As a result, * * * [petitioner] realized
discharge of indebtedness income of $750,000 in 2000.”
In Cozzi v. Commissioner, supra at 445-447, however, we held
that the abandonment of the collateral by the debtor--not the
lender--evidenced the moment of discharge. The lender could not
have abandoned the collateral because the lender never exercised
control over the production agreement. Id. at 440 (“During
* * * [the years 1977, 1978, 1979, 1980, and 1981], * * * [the
debtor] did not take any action to cause the collateral securing
the debt to * * * [the lender] to be conveyed to * * * [the
lender].”). Even if the lender exercised control over the
collateral upon the debtor’s abandonment in 1980, a borrower’s
abandonment of the sole collateral securing a nonrecourse loan
terminates the debt, and the income tax consequences to the
borrower are determined at the time of the termination.12 See
L&C Springs Associates v. Commissioner, 188 F.3d at 868; Carlins
v. Commissioner, T.C. Memo. 1988-79. Consequently, any
12We note that the actions of the lender with respect to the
loan might, as in Cozzi v. Commissioner, 88 T.C. at 446-447,
evidence the debtor’s abandonment of the collateral by
demonstrating the collateral’s worthlessness.
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