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entitled to a section 165 loss upon the reacquisition of the rear
property in its damaged condition. Respondent, citing Conners v.
Commissioner, supra, argues that section 1038 applies to real
property that has been reacquired, even if it has been
substantially changed.
Before considering the four factors described in the
legislative history and quoted in Conners v. Commissioner, supra
at 544, we address petitioner’s argument that the property should
be bifurcated so as to apply section 1038 only to the front
property. Petitioner sold the 225-235 Boston Avenue property as
a single piece of property and reacquired it as a single piece of
property. The warranty deed by which petitioner conveyed the
property to the partnership in 1988 also identifies the property
as a single parcel. Cf. Goudas v. Commissioner, T.C. Memo. 1996-
555. There is nothing in the facts of this case to support a
finding that the 225-235 Boston Avenue property is divisible in
any meaningful way that would be supported by language of the
statute, the regulations, or the legislative history. On this
ground alone, we could hold that section 1038 applies to the
reacquisition of the entire 225-235 Boston Avenue property
because petitioners have conceded the applicability of section
1038 to the front property. However, we go on to consider the
four factors referred to in the legislative history.
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