- 5 - 1001(a). Petitioner disputes whether the amount of the Note is included in the amount realized, given the fact that she was not personally liable on it. The amount of the Note is included in the amount realized on the residence's sale. The amount realized on a sale is computed by adding the amount of money received to the fair market value of other property received. Sec. 1001(b). Any liability, let it be recourse or nonrecourse, that attaches to the subject property is included in the amount realized to the extent that the liability is discharged by the sale. Crane v. Commissioner, 331 U.S. 1, 12-14 (1947); sec. 1.1001-2(a)(1), Income Tax Regs. As to the Note, the amount thereof is included in the amount realized because, even though petitioner was not personally liable on it at the time she sold the residence, First Northwest had a legally enforceable right to receive, and actually did receive, proceeds from the sale equal to the amount that it was owed under the Note. In re Isom, 901 F.2d 744 (9th Cir. 1990); see also Long v. Bullard, 117 U.S. 617 (1886). In sum, the amount realized on the sale of the residence was $131,737, and petitioner’s basis therein was $38,000. Given the additional fact that petitioner may take into account the $1,349 of legal fees, we hold that petitioner realized, and must recognize in 1991, a gain of $92,388 on the residence's sale. As to the accuracy-related penalty, petitioner has not addressed this issue on brief. As applicable herein, sectionPage: Previous 1 2 3 4 5 6 Next
Last modified: May 25, 2011