Maurice E. Hodgkins and Barbara J. Hodgkins - Page 15

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          4.  Crow Canyon                                                             
               Petitioners took out a $155,000 mortgage to purchase 400               
          Crow Canyon Drive, Folsom, California, (Crow Canyon) from                   
          Fireman's Fund Insurance Company (Fireman's Fund) on December 18,           
          1986.  Petitioners also made a $5,000 cash deposit in escrow.  Of           
          the total $160,000 available by reason of the purchase money                
          mortgage and the cash in escrow, $139,000 was applied to the                
          purchase price of the property, and the balance to closing costs.           
          On January 6, 1988, the mortgagee foreclosed.  On disposition of            
          Crow Canyon, petitioners received forgiveness of their $155,000             
          mortgage indebtedness.                                                      
               Petitioners reported a net loss of $23,000 on the                      
          disposition of Crow Canyon.  Respondent, however, determined an             
          $18,826 gain.  Respondent disallowed the following amounts, which           
          petitioners claim as part of their basis:                                   
                    Item                     Amount                                   
               1986-1987 property taxes      $964                                     
               Commission               23,000                                        
               Lost escrow deposit           5,000                                    
               Improvements                  9,191                                    
               Interest paid in escrow       3,670                                    
               Total adjustment         41,825                                        












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