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petitioners were late with payments of insurance premiums and
property taxes on the Montclair property, Home Savings added the
delinquent amounts to the balance of the mortgage held by Mr. De
Ocampo's parents. Delinquency notices were mailed to the residence
of Mr. De Ocampo's parents.
Petitioners claimed home mortgage interest deductions on their
tax return for the Montclair property from the time it was
purchased by Mr. De Ocampo's parents.
Petitioners sold the Curtis property to Mr. De Ocampo's
parents on December 28, 1989, for $215,000. Mr. De Ocampo's
parents purchased the Curtis property so that another son, Richard,
could live there. Mr. De Ocampo's parents obtained the mortgage on
the Curtis property, and Richard made the mortgage payments.
Petitioners received $91,301.52 from the escrow agent on
December 28, 1989, with respect to the sale of the Curtis property.
Petitioners used a portion of the sale proceeds to purchase an
$80,000 cashier's check that was used as a deposit with respect to
the purchase of the Montclair property. The purchase of the
Montclair property closed on December 29, 1989.
On January 14, 1992, Mr. De Ocampo's parents transferred title
to the Montclair property to petitioners. A notation on the deed
shows that the transfer was treated as a gift. On July 28, 1992,
petitioners transferred a one-half interest in the Montclair
property back to Mr. De Ocampo's parents because petitioners were
told by a friend that the transfer to them from Mr. De Ocampo's
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