John H. and Mary E. Douglas - Page 4

                                        - 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.                    

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011