Shirley Dean Emmons and Charles W. Emmons - Page 4

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          difference between the total sales prices from both sales                   
          ($161,055) and petitioners' total adjusted basis in both                    
          properties ($117,422).  The parties now stipulate that                      
          petitioners did not receive the sales proceeds that exceeded the            
          amounts due on the mortgages.  As a result, respondent has                  
          conceded $29,208 of the $43,633 adjustment for capital gains, and           
          now contends that petitioners only had gain of $14,425, which is            
          the difference between their total adjusted basis in the two                
          properties ($117,422) and the combined mortgage liabilities from            
          which they were relieved ($131,847).  Petitioners continue to               
          claim that they had no gain because they did not receive any                
          proceeds from the foreclosure sales.                                        
               Section 1001(a) defines gain or loss from the sale or other            
          disposition of property as the difference between the "amount               
          realized" and the taxpayer's adjusted basis in the transferred              
          property.  The amount realized is the sum of any money received             
          plus the fair market value of the property (other than money)               
          received.  Sec. 1001(b).  The amount realized from a sale or                
          disposition of property includes the amount of liabilities from             
          which the transferor is discharged as a result of the sale or               
          disposition, including a sale in foreclosure.  Crane v.                     
          Commissioner, 331 U.S. 1 (1947); United States v. Hendler, 303              
          U.S. 564 (1938); Chilingirian v. Commissioner, 918 F.2d 1251 (6th           
          Cir. 1990), affg. T.C. Memo. 1986-463; sec. 1.1001-2(a)(1),                 
          Income Tax Regs.                                                            

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