-2-
Additions to Tax
Year Deficiency Sec. 6653(a)(1)1 Sec. 6653(a)(2) Sec. 6661
1985 $388,937 $19,447 2 $ 97,235
1986 950,703 47,535 2 237,676
1
The addition to tax for negligence or intentional
disregard of rules or regulations is codified under sec.
6653(a)(1)(A) and (B) for 1986.
2 50 percent of the interest due on the deficiency.
Susanne Ballantyne is a party to this case by virtue of having
filed a joint return for the years under consideration with her
husband, Don. Accordingly, Don Ballantyne hereinafter will be
referred to as petitioner.
Some of the issues raised by the pleadings have been disposed
of by agreement of the parties. The principal unagreed issue
focuses on the transfer of 86 acres of land located in Escondido,
California (the Escondido property), in 1985 from petitioner to
Balmac, Inc. (Balmac), an entity he controlled. Our task is to
determine whether that transfer should be characterized as a sale,
as respondent contends, or a tax-free exchange, as petitioner
urges.1 In the event we determine that the transfer constituted a
sale, then we must determine the amount of gain petitioner must
recognize therefrom. Other unagreed issues are: Whether
petitioners had $40,188 of unreported interest income in 1986;
1 As will be discussed infra, petitioner claims that he
contributed approximately 44.25 acres of the Escondido property
to BTG Corp., a Delaware corporation, in exchange for 1,000
shares of its stock, and that the balance of the acreage was
transferred on petitioner's behalf to Balmac.
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