Randall L. Kirst and Mary M. Kirst - Page 3

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                  Mrs. Kirst purchased the Newport Beach property in 1981 by                          
            assuming the former owner's existing mortgage (the Newport Beach                          
            mortgage).  In April 1990, the principal balance remaining on                             
            that mortgage was $225,566.36.                                                            
                  On April 27, 1990, Mr. Kirst sold the Sepulveda property for                        
            $235,000 (the Sepulveda proceeds).  He realized a gain of $81,968                         
            on this sale.  Sometime thereafter, Mr. Kirst transferred                                 
            $120,000 of the Sepulveda proceeds to petitioners' joint bank                             
            account (the joint account).  Mrs. Kirst withdrew at least                                
            $20,000 from this account for personal and business reasons.                              
            She also withdrew $40,000 from the joint account in order to pay                          
            a personal debt.                                                                          
                  Prior to petitioners' marriage, Mr. Kirst maintained a                              
            checking account at a local bank.  This account became the                                
            couple's joint checking account (the couple's joint checking                              
            account) after their marriage.  Since May 1990, petitioners paid                          
            the mortgage on the Newport Beach property with checks drawn                              
            against the couple's joint checking account.                                              
                  Using Form 2119, petitioners deferred recognition of the                            
            gain realized from the sale of the Sepulveda property.  They                              
            attached this form to their timely filed 1990 return and                                  
            indicated thereon that Mr. Kirst had not purchased a replacement                          
            property but that he intended to do so within the applicable                              
            replacement period.                                                                       






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