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(the residence). We hold she did. We also must decide whether
petitioner is liable for the accuracy-related penalty for
negligence determined by respondent. We hold she is.
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the subject year. Rule
references are to the Tax Court Rules of Practice and Procedure.
Dollar amounts are rounded to the nearest dollar.
Background
All facts are stipulated. The stipulations of fact and the
exhibits submitted therewith are incorporated herein by this
reference. Petitioner resided in Edmonds, Washington, when she
petitioned the Court. She purchased the residence during 1968,
and she sold the residence on March 6, 1991.
On or about January 19, 1987, petitioner commenced a
bankruptcy proceeding (the proceeding) under Chapter 7 of the
Bankruptcy Code, listing First Nationwide Bank (the Bank) as one
of her creditors; the Bank was the initial mortgagee on the
residence. When the proceeding began, the residence was worth
$103,000, and petitioner owed the Bank $84,290 on the note (the
Note) underlying the mortgage. On April 28, 1989, petitioner
received a discharge of debt under 11 U.S.C. sections 523 and
727. Included in this discharge was her personal obligation to
pay the Bank the amount of the Note.
On March 6, 1991, petitioner sold the residence for
$131,737; her basis in the residence was $38,000. First
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