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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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Last modified: May 25, 2011