Leo and Alla Goldberg - Page 34

                                        -34-                                          
          estate, and, thus, petitioners' exchange was not solely in kind.            
          Gain must be recognized to the extent of such cash received                 
          (boot).  See sec. 1031(b).                                                  
               The excess proceeds must be taken into account as boot                 
          because the replacement property, 29 Hastings, cost IEC less than           
          the proceeds available from the disposition of the relinquished             
          property.  By using the excess proceeds to increase their equity            
          in 29 Hastings (by reducing the mortgage) instead of receiving              
          the excess proceeds outright, petitioners attempted to avoid                
          treating the excess proceeds as property not of like kind.  That            
          petitioners, not IEC, agreed to pay down the mortgage on                    
          29 Hastings is indicative of petitioners' control over the excess           
          proceeds.  "'The power to dispose of income is the equivalent of            
          ownership of it.  The exercise of that power to procure the                 
          payment of income to another is the enjoyment, and hence the                
          realization, of the income by him who exercises it.'  * * *  [The           
          taxpayer's] failure to receive cash was entirely due to his own             
          volition."  Murphy v. United States, 992 F.2d 929, 931 (9th Cir.            
          1993) (quoting Helvering v. Horst, 311 U.S. 112, 118 (1940)).               
               Petitioners realized gain of over $176,000 and, thus, must             
          recognize gain on the exchange equal to $36,335.11.  Sec.                   
          1031(b).                                                                    
          Unreported Income--Unemployment Compensation                                
               Respondent determined that petitioners failed to report                
          $4,606 of unemployment compensation that petitioner received                




Page:  Previous  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  Next

Last modified: May 25, 2011