- 18 -
that petitioners did not identify the Pleasant Hill or Skyland
properties as replacement property within the time period
required by section 1031(a)(3)(A). Accordingly, the gain
realized from the sale of the Antioch property is recognizable.
In the notices of deficiency, respondent determined the gain
realized on the sale of the Antioch property without regard to
petitioners' basis in the property. Section 1001 provides that
the gain from the sale of property is the excess of the amount
realized over the adjusted basis. The adjusted basis of property
is its basis (cost) as determined under section 1011 and as
adjusted by section 1016. Sec. 1012. The basis is adjusted for
the costs of improvements and betterments made to the property.
Sec. 1016(a)(1); sec. 1.1016-2(a), Income Tax Regs.
Petitioners paid $300,000 for 137 acres of the Antioch
property and sold 117 acres of the property in the transaction at
issue in this case. Petitioners' original basis in the 117
acres, based on the $300,000 purchase price, is $256,204, as
conceded by respondent. Petitioners also expended approximately
$30,000 in engineering and consulting costs to improve the 137
acres of the Antioch property. We find that petitioners' basis
in the 117 acres of the Antioch property is $281,825, and their
gain realized is $3,687,175 ($3,969,000-$281,825).
Installment Method
Petitioners argue that they are entitled to report any gain
that they must recognize from the sale of the Antioch property in
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011