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million. On their 1989 Federal income tax return, petitioners
claimed capital gain income of $400,000 on the sale of 25 muscle
cars. Petitioners reported a sale price of $1.2 million and
claimed a basis of $800,000 in the cars sold. Respondent
determined that petitioners are not entitled to any part of the
$800,000 basis claimed on the muscle cars and that petitioners
thus have additional income in 1989 of $800,000.
Petitioners bear the burden of demonstrating that they are
entitled to a basis in the muscle cars in excess of that
determined by respondent. Rule 142(a); Burnet v. Houston, 283
U.S. 223, 227-228 (1931). Section 1012 provides that a taxpayer
generally has a basis in property equal to its cost. Cost is
defined as "the amount paid for such property in cash or other
property." Sec. 1.1012-1(a), Income Tax Regs. Under the
circumstances present here, cost means the amount paid by
petitioners. Detroit Edison Co. v. Commissioner, 319 U.S. 98,
102 (1943); Borg v. Commissioner, 50 T.C. 257, 263 (1968). Thus,
we must determine what amount, if any, petitioners paid for the
muscle car collection.
Mr. Garrett testified that he began collecting muscle cars
in the mid-to-late 1970's. Although petitioners admit that FGI
and TTI issued checks to pay for some of the muscle car
expenditures, petitioners contend that they had sufficient funds
to acquire the collection using after-tax income from the
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