Martin Feldman and Lynne Z. Gold-Bikin - Page 16

                                       - 16 -                                         
          cost of purchasing the King of Prussia property includes only               
          one-half of the outstanding mortgage balance in addition to one-            
          half the reconstruction costs.  See, e.g., Snowa v. Commissioner,           
          T.C. Memo. 1995-336; Kellogg v. Commissioner, supra.                        
               For purposes of section 1034, petitioner husband's cost of             
          purchasing the King of Prussia property is one-half of the                  
          amounts expended for reconstruction and renovation of this                  
          property, plus one-half of the outstanding mortgage balance.                
          These amounts ($114,736 + $70,403) total $185,139.  Accordingly,            
          because the adjusted sale price of the old residence exceeds his            
          purchase price in the new residence by more than the gain                   
          realized ($340,798 less $185,139 equals $155,659, which is more             
          than $106,509), petitioners must recognize all of the gain                  
          realized on the sale of petitioner husband's old residence.                 
          Petitioners have conceded that the addition to tax under section            
          6653(a)(1) for negligence is applicable to any deficiency                   
          determined in this case.                                                    
               Based on the foregoing,                                                
                                             Decision will be entered                 
                                        for respondent.                               












Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  

Last modified: May 25, 2011