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petitioner.2 Among assets distributed to petitioner were four
parcels of real property located in Sacramento, California
(the properties).
On petitioner's 1986 individual Federal income tax return
that was filed on April 15, 1987, petitioner reported a total
cumulative net value of $147,262 for the properties and other
assets she received on liquidation of LY Enterprises, a basis of
$75,000 for her stock in LY Enterprises and a capital gain of
$72,262 relating to the liquidating distribution she received
from LY Enterprises.
In 1987, petitioner contributed the properties that she
received in 1986 on liquidation of LY Enterprises to the Lily
Company, a California limited partnership in which petitioner
owned a partnership interest (the Lily Partnership).
On the Lily Partnership’s 1989 U.S. Partnership Return of
Income (Form 1065), based upon total claimed depreciable tax
bases of $1,912,764 in the properties, a total depreciation
expense of $89,285 was claimed relating to the properties.
On her individual 1989 Federal income tax return, petitioner
claimed a proportionate share of the $89,285 depreciation expense
2 The distribution appears to have been made to a revocable
trust that petitioner established. The parties herein and the
Court treat the properties as if distributed directly to
petitioner, and we make no further reference to petitioner’s
revocable trust.
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