Martin Feldman and Lynne Z. Gold-Bikin - Page 12

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               The mere fact that the King of Prussia property is held as             
          tenants by the entirety does not determine the amount of the                
          $229,472 in construction and reconstruction that is included in             
          petitioner husband’s cost of purchasing the King of Prussia                 
          property.  For Federal tax law purposes, the phrase “taxpayer’s             
          cost of purchasing the new residence” includes contributions of             
          both the taxpayer and the taxpayer’s spouse to determine                    
          nonrecognition of gain under section 1034, if the taxpayer falls            
          under the provisions of section 1034(g) and section 1.1034-1(f),            
          Income Tax Regs.  Petitioner husband fails to satisfy those                 
          provisions yet seeks their benefit.                                         
               Petitioners contend that the private agreement executed                
          approximately 11 months after petitioner husband has sold the               
          Wyndmoor property and 5 months after he had acquired a 50-percent           
          ownership interest in the King of Prussia property allows him to            
          include all of the reconstruction expenses in his cost of                   
          purchasing the King of Prussia property.  Under the terms of this           
          agreement petitioner husband was to use the proceeds from the               
          sale of the Wyndmoor property to do major renovations on the King           
          of Prussia property.  This private agreement cannot rewrite                 
          history and fails to change the Federal tax consequences of                 
          transactions which took place months before it was executed.  Nor           
          does the agreement (or any other evidence of record) establish              
          that petitioner husband in fact paid more than half the cost of             
          the renovations.                                                            




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