- 69 -
We disagree. Whether a debt has been discharged is
dependent on the substance of the transaction and not mere
formalisms. Cozzi v. Commissioner, 88 T.C. at 445.
The moment it becomes clear that a debt will never
have to be paid, such debt must be viewed as having
been discharged. The test for determining such moment
requires a practical assessment of the facts and
circumstances relating to the likelihood of payment.
* * * Any “identifiable event” which fixes the loss
with certainty may be taken into consideration. * * *
[Id.]
See also Friedman v. Commissioner, 216 F.3d 537, 546 (6th Cir.
2000), affg. T.C. Memo. 1998-196; Brountas v. Commissioner, 74
T.C. 1062, 1073 (1980). The conclusion of the foreclosure
litigation was the identifiable event whereby it became clear
that the partnership’s debt would never be repaid by the
partnership. Indeed, according to petitioner’s own
representation, DOE bid only $1 billion in the foreclosure sale,
rather than the entire amount of the debt, “precisely so that it
would retain the ability separately to acquire the remaining
collateral”, the ANG stock, from ANRC. Petitioner thereby
implicitly acknowledges that DOE had no intention of attempting
to recover any part of the remaining debt from the partnership.
Subsequent events bear out that conclusion. Insofar as the
record reveals, DOE never made any other claims against the
partnership for the debt. In October 1988, when DOE reached the
settlement agreement with ANRC, it discharged all the remaining
debt in exchange for the ANG stock even though, as stated in the
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