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Capital Gains From Lake House
Sections 1001 and 61 require a taxpayer to recognize gain on
the disposition of property. The gain is the excess of the
amount realized over the adjusted basis. Sec. 1001(a). Adjusted
basis is the basis, or cost, of the property subject to certain
adjustments not pertinent here. Secs. 1001, 1012.
Petitioners paid $99,027.67 to redeem the lake house from
foreclosure. Petitioners have not proven any additional basis in
the property. They received $125,000 in insurance proceeds and
sold the property for $31,000. They paid $2,637.89 in closing
costs. The amount realized was $153,362.11 ($125,000 plus
$31,000 less $2,637.89). Petitioners' gain was thus $54,334.44
($153,362.11 less $99,027.67). Petitioners reported gain of
$10,000. In the notice of deficiency, respondent increased
petitioners' income by $13,062. The adjustment for the gain on
lake house will be sustained as to this amount.
Net Operating Losses
Petitioners contend that they are entitled to a net
operating loss carried forward to 1985 from 1983 and 1984.
Petitioners presented no evidence concerning the net operating
losses. They rely solely on a schedule attached to their return
as filed and an assertion that an audit of their return for 1984
resulted in no change. The loss claimed apparently related back
to 1981 and 1982, years for which there was no evidence at all.
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