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title to the property. The Church had full rights to enter upon
and to enjoy the property. In addition, the contract for deed
provided the Church would: Insure all improvements on the
property with loss payable to petitioners, keep all improvements
in good repair and condition, assume and pay all taxes on the
property, and keep the improvements on the property occupied.
When the entire purchase price had been paid by the Church,
petitioners were required to convey the legal title of the
property to the Church. The contract for deed prohibited the
Church from assigning, selling, pledging, or mortgaging the
property without petitioners' consent. The contract for deed
specified, in part, that if the Church was in default in the
payments, petitioners could elect to declare the entire unpaid
indebtedness to be due and payable and enforce collection or to
declare the contract canceled.3 As long as the Church made
prompt payments on the indebtedness, the Church had the right to
occupy the property.
Petitioners claimed a charitable contribution deduction on
their 1994 Federal income tax return for the difference between
the property’s $450,000 fair market value and its $152,500
selling price. A part of the deduction was carried over to their
1995 income tax return. Respondent's deficiency determinations
3The provision required written notice of default to be
given to the Church and allowed a grace period of 15 days to cure
the default before petitioners could exercise their rights.
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Last modified: May 25, 2011