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earn a commission of $5,000 for each 20 percent interest he sold
in the property. By June 1989, the entire property was sold for
$525,000 through petitioner's efforts. Petitioner earned a
commission of $25,000 for the sale of the property, which was
credited by Citizens on the deficiency balance owing under the
judgment. Citizens later credited the judgment by an additional
$50,000. The consideration for this credit is not explained in
the stipulation.
On October 29, 1990, petitioners filed a bankruptcy petition
under chapter 7 of the Bankruptcy Code in the United States
Bankruptcy Court, District of Utah, Central Division. In the
bankruptcy petition, petitioners listed the deficiency judgment
balance owing to Citizens as an unsecured claim without priority
in the amount of $100,000. On February 11, 1991, petitioners
received a discharge in bankruptcy, and the indebtedness owing to
Citizens was completely discharged.
As stated above, on their amended 1989 Federal income tax
return, petitioners claimed an ordinary loss of $75,379 on the
foreclosure sale of the lot. Respondent contends that
petitioners realized an ordinary gain of $7,665.97 on the
foreclosure sale.
Section 1001(a) provides, in general, that the gain from the
sale or other disposition of property is the excess of the amount
realized over the adjusted basis of such property, and that the
loss shall be the excess of adjusted basis over the amount
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