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to prove that they are not liable for self-employment tax except
as conceded by respondent.
3. Unreported Income From the Sale of Petitioners' Residence
The parties dispute the basis of the lot Oliver Homes gave
to petitioner wife. Respondent contends that the lot has a zero
basis; petitioners contend that the basis of the lot is $19,500,
which was the cost of the lot to Oliver Homes. Taxpayers bear
the burden of proving their basis in the lot. Rule 142(a).
A taxpayer who acquires property by gift takes a basis in
the property equal to the lesser of the donor's basis or the fair
market value. Sec. 1015. Respondent argues that petitioner
wife had no basis in the lot because her father, LoChirco,
misappropriated it from Oliver Homes. Respondent argues that
because transactions within a family group are subject to special
scrutiny, Fitz Gibbon v. Commissioner, 19 T.C. 78, 84 (1952), and
because LoChirco was petitioner wife's father, his failure to pay
Oliver Homes for the lot before Oliver Homes conveyed it to his
daughter should be treated as a constructive dividend to him,
followed by a gift of the lot from him to her. Respondent
asserts that petitioners did not show that LoChirco recognized a
constructive dividend on the transfer of the lot, and that
therefore he had no basis in the lot when Oliver Homes conveyed
it to petitioner wife. Commissioner v. Farren, 82 F.2d 141, 143-
144 (10th Cir. 1936); Crane v. Commissioner, 68 F.2d 640 (1st
Cir. 1934), affg. 27 B.T.A. 360 (1932). Respondent contends
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