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In petitioner's Schedule D in his 1991 Federal income tax
return, he reported as short-term capital gain:
Date Date Sales Cost Gain
Item Acquired Sold Price or Basis (or Loss)
Land 7/01/90 1/19/91 $4,000,000$3,175,000 $825,000
Subsequently, petitioner reported the capital gain under the
installment method by filing an amended return.
In respondent's notice of deficiency, petitioner's election
of the installment method to report the capital gain recognized
on the sale of real property was not recognized. In addition,
respondent reduced the amount of gain reported from $825,000 to
$727,031.
In connection with the sale of the above land, petitioner
became entangled in a lawsuit. Petitioner was a partner in a
partnership, Moomuku Country Club (Moomuku). The partnership
received $200,000 from a Japanese entity, Utsunomiya, in
connection with the same parcel of land. A dispute arose between
the parties regarding the purpose of Utsunomiya's $200,000
deposit. Utsunomiya filed suit, and also filed a "lis pendens"
on the property.3 Thereafter, in January 1991, Moomuku sold the
parcel of land to another Japanese entity, Japanese Grand Prix
3 "Lis pendens" is a notice filed on public records for the
purpose of warning all persons that the title to certain property
is in litigation, and that they are in danger of being bound by
an adverse judgment. The notice is for the purpose of preserving
rights pending litigation. Black's Law Dictionary 932 (6th ed.
1990).
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