(dissenting):
I respectfully dissent. In my view the increased risks assumed by O’Hare as borrower from the bank and as titleholder of the property justify treatment of him as a joint venturer rather than as a guarantor or lender to whom a fee was to be paid for obtaining financing.
Had O’Hare remained a mere guarantor on a loan to Investors, any payment he received in compensation for that service would undoubtedly have been ordinary income. However, O’Hare’s position as borrower and titleholder exposed him to risks from which he would have been immune as guarantor: (a) the risk that the property could not be sold or that it would be sold for less than $200,000, and (b) the risk that a large liability to a third party would arise from the property itself. In either of these events he would have had no right to reach the assets of Investors and its partners, something he could have done as guarantor.
The majority argues that these risks, although perhaps theoretically present, were properly dismissed by the Tax Court, because: (a) Investors’ $48,000 investment in the property and its willingness to pick up the loan’s carrying costs during the sale period minimized the chance that Investors would simply abandon O’Hare, and (b) the payment schedule adopted by the parties had the effect of eliminating the typical joint venturer’s dependence on ultimate profitability.
With the benefit of hindsight, it is easy to argue that O’Hare’s risks were minimal, and that Investors was so involved financially in the property that it was unlikely to abandon the venture. However, the risk element of O’Hare’s position must be evaluated as of the time when he agreed to *88become borrower and titleholder, rather than after a successful sale was arranged. When the facts surrounding the deal are examined from this perspective, a very different picture emerges.
The venture proposed by Investors was considered so risky by the local financial community that Investors was unable to obtain financing from any source, even though “many institutions” and “many different people” were approached. Investors’ offer to pay $70,000 to anyone who could arrange financing was also unsuccessful. When the Federal Land Bank finally agreed to make the loan, it refused to do so with O’Hare as guarantor, and instead required him to become solely liable on the note. This contemporaneous evaluation by a local expert that O’Hare’s exposure to the bank would be significantly greater as borrower than as guarantor is strong evidence that the majority’s retrospective assessment of the situation is erroneous. Moreover, Investors (recklessly, as it seemed to others at the time) had entered into a $248,000 purchase contract and made a $24,800 downpayment without first securing mortgage financing. Finally, at the time O’Hare agreed to take the property in his own name, there was no immediate prospect of a sale; in fact, it took Investors the better part of a year to sell the property in question. On this record, I fail to see how Judge Quealy could properly conclude that “resale and conveyance on terms negotiated by Investors was a practical certainty.” It clearly was not. For these reasons the majority in my view errs in concluding that O’Hare was no more exposed as borrower and titleholder than he would have been as guarantor.
In relying on the payment schedule contained in the agreement between O’Hare and Investors, the majority also exalts form over substance. It is significant that the payment formula originally arrived at by the parties was not observed in fact. Instead of paying O’Hare the $50,000 to which he would have been entitled under the formula, the parties instead agreed to lower O’Hare’s payment to $40,000 specifically in order to allow Investors to show an adequate profit on the transaction. We should be governed in this matter by what the parties did, not by what they said they were going to do. Since the parties interpreted their own agreement as conditioning O’Hare’s payment on the deal being profitable for both parties, I would conclude that the payment schedule was never intended by the parties to insulate O’Hare from the vagaries of the market.1
Perhaps the clearest proof that the Tax Court misinterpreted the factual situation presented by this case is its statement that O’Hare did not assume any increased risk of loss by becoming the borrower and titleholder because “petitioner’s risk did not differ from that of any lender.” Since a typical mortgage lender (such as the Federal Land Bank in this case) demands the personal guarantee of the buyer (or a prosperous guarantor) in addition to taking a security interest in the property being acquired, it is obvious that O’Hare’s position as owner was not like that of a typical lender. If O’Hare had loaned $200,000 to Investors on a note and taken a security interest in the farm, Investors would have remained liable to him regardless of whether or not the farm was ever sold. By contrast, as owner of the property O’Hare had no right to proceed against anyone, and would have had to content himself with salvaging something from the farm itself if the proposed sale had never taken place.
The majority tries to explain away this error by suggesting that the Tax Court must have meant to say no more than that O’Hare’s position as borrower was identical to that of a lender in a non-recourse situation. While this seems most unlikely, even *89if we assume the non-recourse characterization arguendo,2 it cuts strongly against the position adopted by the majority. O’Hare would have been far more secure as guarantor than as a non-recourse lender, because in the latter case O’Hare would have had no right over against the borrower but would have had his recovery limited to the resale value of the collateral itself. In the latter circumstances a default occurs when the collateral turns out to be worth less than what the borrower paid for it (and thus cannot be resold at a profit). Non-recourse lending therefore makes sense only where the collateral pledged is so easily disposed of at a price equal to or exceeding the amount of the loan that the addition of a personal or corporate guarantee would be superfluous. In contrast, under the circumstances of this case, where the “collateral” consists of land of dubious value, not easily liquidated, the position of a non-recourse lender would be hazardous in the extreme. Thus, if O’Hare were properly characterized as occupying a risk position no better than that of a non-recourse lender, his risk was sufficient to qualify him as a joint venturer.
The majority’s reading of Comtel is unpersuasive. The first two factors relied on by the Comtel court focused on the sharp contrast which the court found between the short-term no-risk investment mentality of Comtel and the buy-and-hold spirit of Zeckendorf, a contrast which the court argued militated against capital gains treatment for the party with the more limited commitment.3 Here, in contrast, neither party ever had any intention of going into the farming business. Both parties were seeking high-yield, risk-proof investments. The Comtel reasoning on these two points is therefore irrelevant.
With respect to the third factor relied on by the Comtel court, the fact that O’Hare did not have the right to encumber the farm at will prior to sale hardly proves that the transaction taken as a whole was not a joint venture. By prohibiting second mortgages on the farm, Investors was merely guaranteeing that O’Hare would not take personal advantage of what was really a joint asset and that the property would be available for immediate resale when the time came. This restriction on O’Hare’s ownership of the farm was nothing more than a cautionary step taken by a prudent joint venturer. Since O’Hare makes no claim that the transaction was to be his alone, it is of no matter that his joint venturer was unwilling to place in O’Hare’s hands the power to take improper advantage of his joint status.
The fourth factor in Comtel supports O’Hare’s position here. Whereas Comtel’s profit was precisely fixed and independent of any contingent event (since a complex network of subordination and indemnity agreements created a structure wherein the investors’ “risk of loss was practically eliminated,” 376 F.2d at 793), here the behavior of the parties clearly indicates that O’Hare’s final payment was in fact tied to the profitability of the resale. Similarly, the fifth factor cannot be read as supporting the Government’s position here, since Investors’ obligation to repurchase was not of short duration and was not in fact viewed by thé parties as depending exclusively on the passage of time. Whereas the holding period in Comtel was as long as seven months only because of the exigencies of the short-swing profits rules, here O’Hare’s obligation was indefinite in nature. Even the payment schedule on which the majority places such emphasis was a far cry from the banker-style formula employed in Comtel. When one considers the fact that even the very rough payment schedule in the present case was altered by the parties in order to make the deal profitable for both, the contrast with Comtel becomes clear. Finally, whereas in Comtel Zeckendorf was as a practical matter corn*90pelled to exercise its option, here a profitable resale was far from guaranteed, for reasons discussed above.
I am forced to conclude that the majority has misunderstood the extent of O'Hare's exposure prior to sale, and has distorted the Comtel analysis in order to fit the facts of this case. For the reasons stated I would reverse the Tax Court’s decision.
. Even when the inquiry is limited to the language of the agreement itself, the evidence as to whether O’Hare’s payment was meant to be tied to profitability is at least ambiguous: while specific payment figures are mentioned for each time period, the agreement also provides that, in the event the property is sold a piece at a time, O’Hare would receive upon each sale a “payment of his agreed profits." (Emphasis supplied). It is therefore not unreasonable to conclude that the parties understood from the beginning that O’Hare’s payment would be conditioned upon the profitability of the transaction.
. Note, however, that O’Hare’s position here was in fact somewhat worse than that of a lender on a non-recourse note. Whereas a non-recourse lender faces no direct liability for claims arising out of the collateral prior to default and foreclosure, O’Hare’s posture here was quite different, since to the rest of the world he was the owner of the property in question prior to sale.
. There can be no dispute that at least one of the two parties to the transaction in the present case is entitled to capital gains treatment.