- 16 -
1, 1974. See sec. 402(a)(2) of the pre-TRA 1986 Code.
Petitioners have presented no evidence to show that petitioner
was a participant in the plan before January 1, 1974. Therefore
petitioners have failed to prove that they are eligible for
capital gains treatment. On the other hand, there is evidence in
the record supporting their ineligibility. The Form 1099R that
petitioner received with respect to the gross distribution states
that no part of the gross distribution is eligible for capital
gains treatment. We hold that petitioners are not eligible for
capital gains treatment with respect to any part of the gross
distribution. Accordingly, petitioners must include the entire
$25,313.22 distribution as ordinary income during tax year 1990.
Issue 2. Capital or Ordinary Loss
There is no question in this case that the foreclosure of
the timeshares was a sale or exchange under which loss was
realized, and hence recognized. Sec. 1001(a) through (c);
Helvering v. Hammell, 311 U.S. 504 (1941). The only question is
the character of that loss. Section 1221(2) provides that
certain property used in a trade or business is not a capital
asset.9 The parties agree that this issue turns on whether the
9 The type of property to which sec. 1221(2) applies is
property of a character which is subject to the allowance for
depreciation, or real property, used in the taxpayer's trade or
business. There is no evidence in this case concerning the
precise property interest that petitioners had in the timeshares.
For instance, there is no evidence establishing that the
timeshares were undivided partial fee interests, and therefore
(continued...)
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011