Dona Elizabeth Conway - Page 4

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          Later, on July 30, 1997, Fortis mailed to petitioner a letter               
          explaining that an incorrect Form 1099-R had been mailed to                 
          petitioner and that petitioner's exchange of a portion of the               
          Fortis annuity contract for the Equitable annuity contract was              
          intended to qualify and should have been processed by Fortis as a           
          nontaxable exchange under section 1035.                                     

          Tax Basis in Home, Consulting Fee, and IRA Distribution                     
               In 1971, petitioner and her husband purchased a home in                
          Wayzata, Minnesota, for $53,500.  The home was located on Lake              
          Minnetonka in an exclusive suburb of Minneapolis.                           
               From 1971 until 1986, petitioner, her husband and children             
          resided in the home.  In 1986, petitioner and her husband                   
          separated and were divorced.  From 1986 until 1994, petitioner              
          and her children continued to reside in the home.                           
               Over the course of the 23 years during which petitioner                
          resided in the home, numerous capital improvements were made to             
          the home.  With regard to improvements made to the home during              
          1971 to 1986, petitioner and her former husband testified at                
          trial and generally described the improvements to the home.                 
          However, billing and payment records relating to improvements               
          made to the home during 1971 to 1986 are no longer available.               
          Those records were maintained by petitioner’s former husband, and           
          he has apparently lost the records.  Some of those improvements             
          are corroborated by copies of building permits.                             

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