Phillip Lee Allen and Carolyn F. Allen - Page 10

                                                - 10 -                                                   

            Commissioner, T.C. Memo. 1977-13 (citing Rev. Rul. 67-254, supra,                            
            with approval and allowing section 1033 treatment of conversion                              
            compensation funds used to construct a property similar to the                               
            converted property).                                                                         
                  Respondent has attempted to attack petitioners’ use of the                             
            funds received from Allstate by arguing that petitioners made                                
            improvements rather than replacements.  Respondent first pointed                             
            out that petitioners replaced their Formica countertops with                                 
            Corian, a more expensive material.  However, petitioners                                     
            explained that they were able to buy the Corian at cost so that                              
            it was less expensive than Formica.  Respondent then alleged that                            
            petitioners had unnecessarily replaced trees on their property                               
            with the settlement proceeds.  Petitioners countered, showing                                
            that the trees had to be moved due to the placement of the new                               
            retaining wall.  Respondent then attempted to show that                                      
            petitioners used the proceeds to replace clear glass with                                    
            colored, but petitioners paid the $300 to color the glass out of                             
            their own pockets.  Finally, respondent argued that petitioners                              
            had introduced air conditioning to the house though it had not                               
            previously been air conditioned.  There is no cost breakdown of                              
            the $4,156.75 paid to replace the entire heating system and to                               
            add air conditioning.  However, even if we were to assume that                               
            half of that amount was attributed to adding air conditioning, it                            
            would be less than 1 percent of the total estimated repair cost.                             





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  Next

Last modified: May 25, 2011