- 49 -
A. Did the June 30, 1986, Foreclosure Sale Constitute
Disposition by the Partnership?
A “transfer upon the foreclosure of a security interest”
constitutes a disposition of mortgaged property so as to trigger
recapture of a portion of investment tax credits and business
energy credits previously claimed with respect to the property.24
Sec. 1.47-2(a)(1), Income Tax Regs. Similarly, a foreclosure
sale constitutes a disposition of property pursuant to section
1001(a).25 See Helvering v. Hammel, 311 U.S. 504 (1941); Aizawa
v. Commissioner, 99 T.C. 197, 198 (1992), affd. 29 F.3d 630 (9th
Cir. 1994); Ryan v. Commissioner, T.C. Memo. 1988-12, affd. sub
nom. Lamm v. Commissioner, 873 F.2d 194 (8th Cir. 1989).
If local law provides the mortgagor a right to redeem the
property, the foreclosure sale generally is not final for tax
purposes until the right of redemption expires. Derby Realty
Corp. v. Commissioner, 35 B.T.A. 335, 338 (1937); Hawkins v.
Commissioner, 34 B.T.A. 918, 922-923 (1936), affd. 91 F.2d 354
24 In general, a taxpayer must recapture a portion of
previously allowed investment tax credits or business energy
credits if the underlying property is disposed of before the
close of the useful life taken into account in computing the
credits. See Jacobson v. Commissioner, 96 T.C. 577, 593 (1991),
affd. 963 F.2d 218 (8th Cir. 1992).
25 Tax consequences may vary depending upon whether the debt
is recourse or nonrecourse, particularly in determining whether
any amount realized from the foreclosure sale represents income
from discharge of indebtedness. See Aizawa v. Commissioner, 99
T.C. 197, 200-201 (1992), affd. 29 F.3d 630 (9th Cir. 1994).
Page: Previous 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 NextLast modified: May 25, 2011