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date of transfer, and an adjusted basis of $349,774.06 in the
hands of petitioners on that date. As of that date, the Clinton
Way Property was encumbered by a deed of trust in favor of
Standard Insurance Company securing a note (the Standard
Insurance Note) having an unpaid principal balance of
$1,386,654.50. NAC Corporation did not assume liability under
the Standard Insurance Note, on which petitioners remained
personally liable.
The second and third of the three parcels of real property
which petitioners transferred to NAC Corporation, collectively
referred to herein as the Fresno/Herndon Property, had a fair
market value of $1,200,000 on December 26, 1989, the date of
transfer, and an adjusted basis of $631,632.42 in the hands of
petitioners on that date. As of that date, the Fresno/Herndon
Property was encumbered by a deed of trust securing a note (the
Bunn & Duran Note) in favor of certain individuals having an
unpaid principal balance of $161,558.28. NAC Corporation did not
assume liability under the Bunn & Duran Note, on which
petitioners remained personally liable. The parties agree,
however, that the Fresno/Herndon Property, when transferred to
NAC Corporation, remained "subject to" the Bunn & Duran Note.
The following table reflects the computation of the excess
of the above-described liabilities over petitioners' combined
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