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Issue 5. Characterization of New Mexico Losses
The fifth issue is whether petitioner is entitled to a $47,418
ordinary loss in 1993 stemming from an IRS forced tax sale of three
New Mexico properties he owned. Petitioner argues that he is
entitled to such a loss (arising from the difference between the
market value of the properties and the amount realized at auction).
On the other hand, respondent argues that petitioner is entitled to
a $47,418 capital loss.
Petitioner owned four properties at the Mid-Valley Air Park in
Las Lunas, New Mexico (a residential airport). In 1993, the IRS
seized these properties in order to satisfy petitioner's Federal
income tax obligation for years prior to those in issue. After
selling the four properties, respondent credited petitioner's tax
accounts in amounts less than petitioner's bases in these
properties.
Respondent conceded that petitioner is entitled to a
$19,424.25 ordinary loss in 1993 with respect to one of the
properties; namely, a rental property. The character of the loss
with respect to the other properties, an airplane hangar and two
undeveloped 1-acre lots, is at issue.
Section 1001(a) defines gain or loss from the sale or other
disposition of property as the difference between the "amount
realized" and the taxpayer's adjusted basis in the transferred
property. The amount realized is the sum of any money received
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