- 70 -
basis), affd. on other grounds 490 F.2d 1172 (3d Cir. 1974); cf.
sec. 1.1221-2(c)(5)(i), Income Tax Regs.; sec. 1.1221-2T(b)(2),
Temporary Income Tax Regs., 58 Fed. Reg. 54075 (Oct. 20, 1993).
Respondent did not determine and has not asserted--although
there might have been valid grounds for doing so--that unrealized
receivables with respect to Phase II mausoleum crypt sales should
have been accrued prior to or upon completion of the Phase II
mausoleum in May 1989.17 It therefore appears that the Woodbine
receivables were not taken into income, under Woodbine's method
of accounting, which respondent has not disturbed, until they
were collected. As a result, the receivables on hand at the time
of Alice Berger's sale to the Kunkowskis, on November 17, 1989,
had a zero basis in her hands.18 It appears that the proceeds of
17Cf. Evergreen Cemetery Association v. Burnet, 45 F.2d 667
(D.C. Cir. 1930), affg. 13 B.T.A. 638 (1928), discussed supra pp.
48-49.
18It does not escape our notice that there were elements of
financial and tax planning in the structuring of the sale
transaction that do not appear to have been brought to the
attention of Howard or Alice Berger, to the financial and tax
detriment of Alice Berger.
The American Cemetery Consultants appraisal valued the
Woodbine receivables, as of Oct. 1, 1988, which then had a face
amount of $428,600, by deeply discounting them to a fair market
value of $172,298. The latter figure is the value we have
attributed to the receivables for purpose of allocating the sale
price among the various assets; after all, the $172,298 valuation
of the receivables was used in computing the $680,000 sale price
of Woodbine to be received by Alice Berger. By causing the
receivables to be transferred to the Cemetery Association, the
Kunkowskis in effect caused the difference between the deeply
discounted value of the receivables, which has been included as
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