Section of Taxation Publications
  VOL. 56
NO. 1
FALL 2002
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 Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
Which Price is Right? Valuing Real Estate Purchased in Bulk with Nonrecourse Promissory Notes: Epic Associates v. Commissioner
Brett Dockwell Kravitz


The purchase of multiple items of real property in a single transaction—a “bulk” purchase—can raise issues in establishing a valuation for tax purposes. One question that arises is whether multiple properties purchased in bulk may be valued based on appraisals of each individual property. In Epic Associates v. Commissioner, the Tax Court held that multiple properties purchased in bulk at “wholesale” may nevertheless be valued at “retail” for tax purposes when the purchaser clearly intends to resell the properties. As a result, nonrecourse promissory notes executed by the purchaser in Epic Associates constituted bona fide indebtedness, enabling the taxpayer to deduct interest payments made on the notes and claim depreciation deductions on the property purchased with the notes.

Part I of this note briefly discusses the use of nonrecourse mortgages in real estate finance and presents the facts of Epic Associates. Part II details the Tax Court’s decision. Part III analyzes the court’s decision.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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