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clearly a factor, petitioners arranged to sell the property to a
trust of which Swansons' Tool was the beneficiary. Accordingly,
on December 19, 1986, petitioners conveyed the Algonquin property
to "Trust No. 234, Barry D. Elman, trustee," (hereinafter Trust
No. 234) under a Deed in Trust, which was received and filed by
the Recorder for the city of McHenry, Illinois. As a consequence
of this transaction, petitioners reported a long-term capital
gain of $141,120.78 on Schedule D, Capital Gains and Losses, of
their 1986 Federal income tax return, reflecting a $225,000 sale
price and an $83,879 basis.
Petitioners continued paying the electric bills, heating,
exterior maintenance, and house sitting expenses of the Algonquin
property through May or June of 1987. In March of 1988,
Swansons' Tool reimbursed petitioners for maintenance and repair
expenses incurred during the time period December 1986 through
May 1987, as well as the expense of moving petitioners' personal
belongings in September 1987. Swansons' Tool capitalized these
expenditures as part of its basis in the Algonquin property.
Subsequent to the signing of a "Real Estate Sales Contract"
during March of 1988, the Algonquin property was sold by
Swansons' Tool to an unrelated third party on June 23, 1988.
5(...continued)
1202 for 60 percent of net long-term capital gains. The repeal
was effective for tax years beginning after Dec. 31, 1986.
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