- 36 - evidence, reflects that their basis in the property would have originally been more than $1.75 million. Therefore, we hold that petitioners’ basis, as determined by respondent, was understated. Accordingly, we hold that petitioners’ basis in the Crestwood property was $2 million. Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930). Accordingly, petitioners must recognize $525,000 of gain on the transfer of the property to Prudential Bancorp. E. Unreported Income 1. Salaries Petitioners have stipulated that they failed to report salaries and self-employment income in varying amounts for 1986 and 1989. Those amounts will be considered in the Rule 155 computation. Petitioners reported $42,000 of income subject to Social Security on Schedule SE of their 1986 Federal income tax return. Respondent contends that Mrs. Bowden omitted $18,000 in compensation from PWIC in the 8-month period ending December 31, 1986. Petitioners contend that the $18,000 was, in fact, included in the $42,000 already reported on the aforementioned Schedule SE. From the record in this case, we have no reason to doubt petitioners’ testimony that the $18,000 amount was already included in the total of $42,000 that respondent determined should be reported. Accordingly, the $18,000 is deemed to be part of the $42,000 already reported by petitioners.Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Next
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