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his adjusted basis in the Castro Valley house was $72,397 (the
$120,666 cost less the $48,269 deferred gain).
On August 27, 1988, petitioner purchased a condominium
located in Incline Village, Nevada, for $149,793.1 At that time,
petitioner moved all of his furniture and personal belongings
into the condominium.
On the same day that petitioner purchased the condominium,
he leased the Castro Valley house to Robert Whitlock and Patricia
Lofton-Whitlock (the Whitlocks). Under the agreement petitioner
leased the house to the Whitlocks for a 1-year term commencing
September 1, 1988, subject to automatic month-to-month renewal,
and granted the Whitlocks the option to purchase the house. When
the Whitlocks did not exercise their option to purchase the house
by the end of the 1-year term, petitioner listed the house for
sale. On April 27, 1990, petitioner sold the Castro Valley house
for $169,000, incurring selling expenses of $10,756, and, thus,
realizing $158,244 on the sale of the house.
Petitioner reported the sale of the Castro Valley house as
the sale of his principal residence on a Form 2119 attached to
his 1990 return. On the Form 2119 petitioner reported an $85,847
gain on the sale ($158,244 amount realized less $72,397 basis of
home sold). He reported that the cost of the new home was
1The $149,793 purchase price includes the $149,000 contract
sales price of the condominium plus $793 of capitalized closing
costs paid by petitioner.
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