Floyd L. Garrett and Dorothy G. Garrett - Page 9

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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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