- 4 -
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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