- 4 -
District of Delaware discharged Danella Baker's debts in April
1993. The Bakers did not make any payments to petitioners on the
second deed, and petitioners did not receive any distribution
with respect to their respective claims made with the bankruptcy
courts. On January 6, 1992, First Security was the sole bidder
at the foreclosure of the Fort Washington property. First
Security purchased the property for $70,000. This event
precluded any disbursement to petitioners and rendered
petitioners' second deed worthless.3
On their 1989 income tax return, petitioners reported the
gain on the sale of the improved lot to the Bakers as long-term
capital gain on Form 6252, Installment Sale Income. Petitioners'
Form 6252 for 1989 reflects the following:4
Selling price $61,000
Mortgage held by petitioners (21,900)
Cash received by petitioners 39,100
Cost or other basis $15,000
Depreciation -0-
Adjusted basis 15,000
Commissions and expenses 1,561 (16,561)
Gross profit 44,439
Cash received in 1989 39,100
Taxable gain reported in 1989 5,339
3 Respondent does not dispute that the second deed became
worthless at this time.
4 We note that petitioners' Form 6252 for 1989 contains
mathematical errors which are not at issue in this case.
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