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decision. On May 8, 1991, the U.S. District Court for the
Central District of Illinois affirmed the bankruptcy court's
decision. Petitioner and his spouse appealed the decision of the
District Court to the U.S. Court of Appeals for the Seventh
Circuit, and their appeal was dismissed with prejudice by order
dated February 4, 1993.
In a statement dated April 28, 1989, attached to petitioner
and his spouse's joint Federal income tax returns for 1986, 1987,
and 1988, petitioner and his spouse wrote that they had been the
owners of 1,120 acres of farmland in Illinois and 1,342 acres of
farmland in Indiana and that "The [First National] Bank has sold
our equipment and our Illinois buildings and all but 384 acres of
Illinois land against our wishes."
In a statutory notice of deficiency dated September 16,
1991, respondent determined, inter alia, that petitioner and his
spouse had sold approximately 652 acres of farmland in 1986.
According to respondent's computation, the amount realized on the
sale was $716,235 and their adjusted basis was $199,101,
resulting in a long-term capital gain deduction of $310,280.40.
Ultimately, respondent increased their long-term capital gains by
$206,853.60 for 1986.
Subsequent to the issuance of the statutory notice of
deficiency and the filing of the petition in this case,
respondent verified that: (1) A portion of the proceeds from the
sale of the farmland in 1986, totaling $147,624.52, was applied
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