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transferee liability. Gumm v. Commissioner, 93 T.C. 475, 480
(1989), affd. without published opinion 933 F.2d 1014 (9th Cir.
1991); Stokes v. Commissioner, 22 T.C. 415, 428 (1954).
Respondent presented the report and testimony of Harry J. Smith,
who valued the real property transferred to petitioners at
$69,000, as of June 6, 1991. Mr. Smith's valuation of the
subject property consists of two components: (1) The house built
during 1989 and parcel 1 upon which the house was built, which
were valued together at $59,000;14 and (2) parcels 2 and 3, which
were valued together at $10,000. We find Mr. Smith's valuation
persuasive.15
At the time the real property was transferred to
petitioners, it was encumbered by a mortgage. The balance of the
loan secured by this mortgage was $51,871 on the date of
transfer. For purposes of determining petitioners' transferee
liability, the fair market value of the real property must be
reduced by the outstanding mortgage against the property. Stokes
v. Commissioner, supra. Therefore, we find that the value of the
real estate interest transferred to petitioners on June 6, 1991,
was $17,129 ($69,000 less $51,871).
14Petitioners argue that Mr. Smith valued a house built in
1992, rather than the house that existed at the time of the
transfer. We do not find this argument persuasive. In valuing
the real property, Mr. Smith relied on the property appraiser
records for Leon County, Florida, which reflect information
regarding the house built in 1989.
15Petitioners did not present any evidence regarding the
fair market value of the real property in question.
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