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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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