Shirley Dean Emmons and Charles W. Emmons - Page 6

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          Hendler, supra.  Therefore, a taxpayer who transfers mortgaged              
          property, whether to the mortgagee or another third party, and is           
          discharged from his liability on the mortgage debt in                       
          consideration for the transfer, realizes a benefit in the amount            
          of the liability discharged.  In the instant case, this reasoning           
          dictates that petitioners have taxable capital gain to the extent           
          that their personal mortgage indebtedness, paid off with the                
          foreclosure proceeds, exceeded their basis in the properties.               
          Crane v. Commissioner, supra; United States v. Hendler, supra;              
          Chilingirian v. Commissioner, supra.                                        
               Petitioners' claim that they are entitled to a deduction for           
          ordinary losses equal to their equity in the properties less                
          depreciation is without merit because, as discussed above, their            
          amount realized as a result of the foreclosures exceeded their              
          adjusted basis in the properties.                                           
               Respondent determined an addition to tax under section                 
          6651(a)(1) for the late filing of petitioners' return.  The                 
          return was due on April 15, 1992, and filed on October 16, 1992.            
          There is no evidence of an extension to file.  Section 6651(a)(1)           
          imposes an addition to tax for failure to file timely Federal               
          income tax returns unless the taxpayer shows that such failure              
          was due to reasonable cause and not willful neglect.  United                
          States v. Boyle, 469 U.S. 241, 245 (1985).  Petitioners have not            
          addressed the late filing or offered any reasonable cause                   

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