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Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 1989, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
After concessions by petitioners, the primary issue for
decision is whether petitioners received discharge of
indebtedness income upon settlement of their liability on a bank
loan.
FINDINGS OF FACT
Many of the facts have been stipulated and are so found.
At the time the petition was filed, petitioners resided in
Cloudcroft, New Mexico. All references to petitioner are to
Layne E. Preslar.
In early 1983, petitioner, a real estate agent of 25 years,
began negotiations for the purchase of a 2,500-acre ranch near
Cloudcroft, New Mexico, known as the McCracken-Rinconada Ranch
(the Ranch). Petitioner wanted to develop the Ranch as a
sportsmen's resort. Petitioner planned to subdivide and develop
160 acres of the Ranch and to sell 1- to 2-acre lots on which
cabins or vacation homes could be built (cabin lots). Each cabin
lot would be sold for approximately $16,500, and petitioner
projected gross revenue from sales of cabin lots of approximately
$1,584,000. The remaining 2,340 acres on the Ranch that were not
to be sold as cabin lots would be used for hunting and other
outdoor recreation.
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Last modified: May 25, 2011