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show that he is qualified for nonrecognition under section
1034(a).
In the notice of deficiency, respondent determined that
petitioner's gain on the sale of his old residence was equal to
the full sales price of the property; no reduction was taken for
petitioner's adjusted basis in the property, although such a
reduction is provided for in section 1001. The Court brought
this matter to the attention of the parties, and they filed a
supplemental stipulation of facts agreeing that the $125,000
selling price included in petitioner's income should be reduced
by $10,780 of costs and expenses in connection with the sale.5
Accordingly, petitioner realized $114,220, rather than $125,000
as the net proceeds of sale. In addition, the parties stipulated
that petitioner's adjusted basis in the property sold was
$77,806.25. Accordingly, petitioner realized income of
$36,413.75 from the sale of the Richmond realty. The parties
should reflect these differences from the notice of deficiency in
their Rule 155 computation.
Next, we consider the home mortgage interest deduction of
$11,582 reported by petitioner on his 1989 return. Petitioner
claims that this amount includes $7,532.08 in mortgage interest
paid, and several amounts reported on the settlement statement
petitioner received when he sold the Richmond property,
5 Petitioner claimed $2,000 of closing costs as part of an
interest deduction on his return. Respondent disallowed this
amount as part of a disallowance of a large amount of interest
claimed.
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