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depreciation of $4,913 on the rental portion of the Mequon
residence.
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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