Under local law, after S1 distributed the note toA, S2 was relieved of its liability to S1 and was directly liabletoA. Whether S2 is indebted toA rather than S1 is determined under general Federal tax principles and depends upon all of the facts and circumstances.
As buyers would have to live in their new homes for at least 180 days a year, they would also (very handily) be liableto pay American tax on any foreign earnings.