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property; she settled for one-third of the net proceeds from the
future sale of the property. If the property increased in value
after the death of Fulvio Suvich, Mrs. Marcus would share in the
appreciation. Likewise, if the property decreased in value, Mrs.
Marcus would share in its depreciation. The potential
appreciation or depreciation would not be part of an inheritance,
or received in lieu of an inheritance, but simply the effect of
market forces. As in Parker v. United States, supra, Mrs. Marcus
must show what her basis in the property would have been had she
inherited her share (one-third) of the property.
Respondent determined that petitioners failed to establish
Mrs. Marcus' basis in the property and that consequently, the
entire $37,898 is taxable. Where the Commissioner has determined
in a statutory notice of deficiency that a taxpayer's basis in
property is zero, the taxpayer bears the burden of proving basis
for the purpose of calculating gain or loss on the sale of the
underlying property. Rule 142(a); Welch v. Helvering, 290 U.S.
111 (1933); Counts v. Commissioner, 42 T.C. 755, 760 (1964).
That principle applies to this case. If petitioners cannot
establish what Mrs. Marcus' basis would have been had she
inherited her share of the property, then the entire amount she
received in settlement would be taxable.7
7 Respondent also makes the argument that depreciation, allowed
or allowable, would have reduced whatever basis Mrs. Marcus had
(continued...)
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