Douglass H. and Suzanne M. Bartley - Page 10

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          respondent disagrees with each of petitioners' arguments.  We agree         
          with respondent.                                                            
               First, we do not agree that taxing the capital gain realized           
          on the sale of petitioners' Mequon residence is a violation of              
          petitioners' equal protection rights.  The Fifth Amendment to the           
          Constitution protects against the deprivation of life, liberty, or          
          property without due process of law.  The Due Process Clause of the         
          Fifth Amendment provides protection against Federal discriminatory          
          action "so unjustified as to be violative of due process".  Shapiro         
          v. Thompson, 394 U.S. 618, 642 (1969); Bolling v. Sharpe, 347 U.S.          
          497-499 (1954); Ward v. Commissioner, 608 F.2d 599 (5th Cir. 1979),         
          affg. per curiam T.C. Memo. 1979-39.  Further, the Due Process              
          Clause of the 5th Amendment has been held to incorporate the Equal          

                    Process Clause of the 5th Amendment, because                      
                    it transforms a real loss into a fictitious                       
                    gain and creates phantom income or distorts                       
                    income beyond any reasonable proportions.                         
                    IRS wrongfully fails to recognize the                             
                    phenomenon of inflation, as explained more                        
                    fully below.                                                      
                         c.  The house "gain" taxing scheme                           
                    violates the Equal Protection component of                        
                    the 5th Amendment for an additional reason,                       
                    namely because IRS refuses to recognize                           
                    either nominal or real losses on the sale of                      
                    a residence, even though it readily taxes                         
                    nominal gains.  That results in disparate                         
                    treatment as between homeowners who cannot                        
                    deduct losses and businesses which can                            
                    because businesses can deduct those losses.                       

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