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The amount paid by the Trust for Mr. Bowers' interest was 25
percent of the liabilities, or $33,835.79 (25 percent of
$135,343.17). Mr. Bowers' basis as transferor was 25 percent of
the basis of the Burlington property when Florence transferred
title. Based on the record, we find that the basis of the
Burlington property at that time was $122,000, the original
purchase price of Mr. Bowers and Florence in 1978. Accordingly,
Mr. Bowers' basis would have been $30,500 (25 percent of
$122,000). The greater of these is $33,835.79. No gift tax was
paid. Accordingly, the Trust's basis in the 25 percent
transferred from Mr. Bowers was $33,835.79. The cost of
acquiring Florence's 75-percent interest was $121,507.38 ($20,000
paid in cash plus $101,507.37 (75 percent) of the liabilities).
To summarize, the following items are to be used in
calculating petitioners' gain on the sale of the Burlington
property:
Consideration received $320,000
Closing costs $2,037.00
Repairs or selling expenses 4,650.00
Attorney fees 5,123.11
Basis in interest from Mr. Bowers
1 33,835.79
Basis in interest from Florence 1 121,507.38
$320,000 $167,153.28
1 Rather than the part gift-part sale analysis above, the Court would reach the
same result from the fact that the Trust paid $20,000 to Florence plus assuming
liabilities of $135,343.17 for the property for a total basis of $155,343.17.
Accordingly, the gain which petitioners must recognize in 1989 is
$152,846.72 ($320,000 minus $167,153.28).
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