-2-
1997, pursuant to section 7430 and Rules 230 through 232.2
Neither party requested an evidentiary hearing. The relevant
facts are taken from the parties' memoranda and our opinion in
Schlicher v. Commissioner, T.C. Memo. 1997-37 (Schlicher I). At
the time the petition in this case was filed, petitioner resided
in Clayton, California.
The only issue for decision is: (1) Whether respondent's
position was substantially justified within the meaning of
section 7430(c)(4) and the regulations thereunder. We hold it
was.
Background
In July of 1988, petitioner realized a $419,000 gain from
the sale of his principal residence in Livermore, California. It
is undisputed that the entire amount therefrom was eligible for
nonrecognition treatment pursuant to section 1034(a).
In December of 1988, petitioner purchased 51 acres of
undeveloped land in Clayton, California (the Clayton Property),
for $380,000. Within the 2-year period following the date of
sale of the Livermore residence, petitioner incurred expenses of
$146,922 to construct a residence, garage, and a barn on the
Clayton property, which he used for personal purposes.
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure, unless otherwise indicated. All dollar amounts are
rounded to the nearest dollar, unless otherwise indicated.
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