Douglass H. and Suzanne M. Bartley - Page 4

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          depreciation of $4,913 on the rental portion of the Mequon                  
               As a consequence of petitioner's departure  from  the                  
          commission, petitioners could no longer afford the monthly mortgage         
          payments; thus petitioners sold their Mequon residence for $270,000         
          on June 15, 1993.                                                           
               The parties stipulated that the adjusted basis of the Mequon           
          residence on the date of sale was $213,582, and that the selling            
          expenses totaled $21,191 (of which $17,588 was allocated as                 
          personal expenses and $3,603 as rental expenses).2  Thus, the gain          
          on the sale of petitioners' Mequon residence was $40,140. (The              
          amount of gain is not in dispute.)                                          
               In June 1993, petitioners purchased land in Ely, Minnesota,            
          and built a cabin thereon (the Ely residence), costing $66,588.             
          They began living there in October 1993.  On February 1, 1994,              
          petitioners sold the Ely residence for $66,588.  Subsequently, they         
          moved into a rental apartment.                                              
          Federal Income Tax Return                                                   
               Petitioners neither reported any capital gain on the sale of           
          their Mequon residence on their 1993 Federal income tax return nor          
          attached thereto a Form 2119, Sale of Your Home.                            

               2    At closing, after subtracting the unpaid balances of              
          three mortgages totaling $192,251 and the selling expenses,                 
          petitioners received $50,533 of the proceeds.                               

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