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For taxable year 1988, petitioner and Mrs. Hovhannissian
filed a joint income tax return. Of the $719,480 in cash
received upon the sale of the 225-235 Boston Avenue property,
petitioners reported $336,192 as gain and $383,288 as a recovery
of basis from an installment sale. Petitioners also received and
reported $176,228 in interest payments from the partnership.
Petitioner and Mrs. Hovhannissian filed separate returns for
taxable year 1989. They each reported $60,000 of the $120,000 of
interest payments received from the partnership during that year.
In 1990, petitioner and Mrs. Hovhannissian received no interest
payments from the partnership.
Following the sale in 1988, the partnership began converting
the 225-235 Boston Avenue property into a self-storage rental
facility. In 1989, the partnership filed for bankruptcy, leaving
the conversion incomplete and defaulting on its obligations to
pay interest and principal on the mortgage note. The main
building on the front property, which had formerly served as
petitioner’s furniture store, had been stripped to a bare shell
to house the self-storage facility. The main building contained
449 mini storage bins installed on all three floors. The doors
from all of the bins were missing. The partnership had also
removed the roof of the unfinished garage structure and several
important structural members.
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