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On November 4, 1986, Eva, for a total stated consideration
of $1,828,000, sold back to Christa Oil the above partial
interests in the three oil leases that she had received in
November of 1985. Of the total stated consideration, $100,000
was to be paid to Eva in cash, and the $1,728,000 balance due
under the contract with Christa Oil was to be reflected by the
assignment to Eva of a specified number of barrels of oil to be
produced from wells owned by Christa Oil, and by Christa Oil's
commitment to make cash payments to Eva to the extent the barrels
of oil Eva actually received under this contract and the $100,000
downpayment were not adequate to fully pay Eva the total
$1,828,000 due under this contract.
On audit and based on records of Christa Oil, respondent
determined that Eva received under the above 1985 and 1986
transactions with Christa Oil, $66,913 in 1985, $165,923 in 1986,
and $518,278 in 1987, in additional payments from Christa Oil.
Respondent treated these payments as additional capital gain
income to petitioners for each respective year.
During the audit, petitioners provided respondent's
representatives no information regarding the amount Eva received
on the above transactions. Petitioners have not established that
these payments were reported anywhere on their joint Federal
income tax returns.
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