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1989 Schedules C, based on our findings and holdings that
petitioners did not own certain of the vending machines and that
they were not entitled to depreciation and other deductions.
D. Transfer of Crestwood Property to Prudential Bancorp
On September 15, 1989, petitioners transferred the Crestwood
property to Prudential Bancorp. In exchange, petitioners were
released from their obligations to Southern Pacific and NBSC, the
debt owed Hollis Bowden, and the $1.4 million loan obligation to
Concordia Bank. In addition, all debt giving rise to mechanic's
liens on the property was satisfied. The obligations to Southern
Pacific and NBSC were in connection with petitioners’
corporations' debts and petitioners’ personal guaranties.
Prudential Bancorp, after obtaining the Crestwood property from
petitioners, sold it to unrelated third parties for $2,525,000,
its fair market value.
Petitioners reported, on their 1989 income tax return, that
the sale price of the Crestwood property was $1,786,000, with a
cost basis of $1,872,776.17 It appears that petitioners derived
the “sale price” from their computation or estimate of the amount
of debt canceled by means of the settlement. Petitioners
therefore reported a loss of $86,776 on their 1989 tax return.
On brief, petitioners contend that the sale price should be
17 On brief, petitioners erroneously state a “total cost of
$1,786,000" and “a sales price * * * of $1,872,776".
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