- 12 - ownership. On September 2, 1988, a few weeks after petitioners recorded their deed, they sold the house to Inderjit and Bharati Dutt. The gain that petitioners showed on their return and the gain that respondent determined are as follows: Per Return Per Exam Adjustment Sales price $127,500 $127,500 $-0- Purchase price, (119,560) (114,905) 4,655 improvements, and expenses of resale Gain 7,940 12,595 4,655 The parties' post-determination maneuvering adds complexity to their disagreement. They stipulate or claim that some of what was capitalized should now be deducted and some of what was deducted should now be capitalized. First, the parties stipulated that $1,837 previously capitalized should be deducted as an investment interest expense. Second, petitioners assert that $9,851 previously deducted as a rental loss should now be capitalized. In 1988 petitioners deducted a $9,851 rental loss, which respondent disallowed on the grounds that the property was unproductive, and for lack of substantiation. Petitioners now concede that they did not use the property to produce income and that therefore they should not have taken the rental loss in 1988. They now insist, however, that the expenditures entitle them to adjust their basis upwards.Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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