Richard D. Frazier and Yvonne Frazier - Page 3

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          property was not used in any trade or business of petitioner.               
          The mortgage on the Dime Circle property, which secured a                   
          recourse obligation against petitioner, was foreclosed by the               
          lender on August 1, 1989, at which time petitioners were                    
          insolvent.  The lender bid in the Dime Circle property at the               
          foreclosure sale for $571,179.  The record is silent as to how              
          the bid-in price was determined.  Apparently, the only bid was              
          that of the lender.                                                         
               At the time of the foreclosure sale, the outstanding                   
          principal balance of the debt was $585,943.  The lender did not             
          attempt to collect the difference between the outstanding balance           
          of the debt and the bid-in amount.  On August 1, 1989,                      
          petitioners' adjusted basis in the Dime Circle property was                 
          $495,544 (cost basis of $682,682 minus accumulated depreciation             
          of $187,138).  After the transaction, petitioners were still                
               At the time of the sale, real estate prices had dropped                
          dramatically throughout Texas, causing many foreclosures and bank           
          failures throughout the State.  The Dime Circle property was not            
          resold until about 2 and a half years later for approximately               
               The fair market value of the Dime Circle property at the               
          time of the foreclosure sale was $375,000.                                  

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