Julius and Hanan Dibsy - Page 4

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               Petitioners then disbursed the funds from the sale as                  
          follows:                                                                    
               Payment of note to W. Hanshaw           $46,641.16                     
               Interest on above note to Hanshaw1          108.83                     
               Payment of note to W. Hanshaw           158,850.00                     
               Interest on above note to Hanshaw          900.15                      
               Note to petitioners from purchasers      43,150.00                     
               Inventory service                       249.14                         
               Escrow and closing costs                  1,639.55                     
               Creditors' claims paid                  8,843.38                       
               State Board of Equalization        19,483.57                           
               Payoffs of preexisting loans             6,557.85                      
                    Total                         286,423.63                          
               1 We assume that "W. Hanshaw" and "Hanshaw" are both one and           
          the same person discussed elsewhere.                                        
               In connection with Sunshine Liquor, petitioners claimed a              
          total of $100,547 as depreciation and amortization expenses                 
          during 1986, 1987, and 1988.  Their basis in the noninventory of            
          Sunshine Liquor was $109,453 on March 31, 1989.  The selling                
          price of these assets was $242,500.                                         
               From October 5, 1988, until March 31, 1989, petitioners                
          operated both Sunshine Liquor and Bayshore Liquor, and they were            
          entitled to any profits earned by either store.  The parties                
          agree that if section 1031 does not apply to the disposition of             
          Sunshine Liquor, then petitioners must recognize a long-term                
          capital gain of $133,047 on the transaction.                                
                                       OPINION                                        
               Respondent concluded that the purchase of one liquor store             
          and subsequent sale of another by petitioners were two separate             
          taxable events.  Accordingly, respondent determined that                    




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