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Bank stock was $5.92 per share, and each share was worth $8.34.
Each share of Mr. Burke's University Bank stock was worth $1.89.
On June 29, 1982, Mr. Burke and BEC executed two contracts
under which Mr. Burke transferred the properties to BEC in
exchange for its assumption of the liabilities which he assumed
from Mrs. Burke and its cancellation of debt owed by him. One
contract provided that Mr. Burke sold the North Main property to
BEC for $250,000, consisting of BEC's assumption of the $5,294
debt and its cancellation of his $244,706 debt. The second
contract provided that Mr. Burke sold the Walnut property to BEC
for $675,000, consisting of its assumption of the $150,638 debt
and its cancellation of his $524,362 debt. One day later,
Mr. Burke deeded the properties to BEC, and BEC assumed $155,932
of debt and canceled Mr. Burke's debt of approximately $853,000
(instead of the total canceled debt of $769,068 shown in the
contracts). Following the transaction, BEC claimed a $925,000
basis in the properties and apportioned this basis as follows:
Asset Acquisition Cost
Land:
Walnut property $231,250
Buildings:
Walnut property 507,180
North Main property 186,570
On Schedule D (Capital Gains and Losses) of their 1982
Form 1040, petitioners reported that, on June 30, 1982, they had
2(...continued)
inadmissible and do not rely on it.
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