James E. Griffin and Katrina F. Griffin, Transferees - Page 16

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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             
               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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