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any gain or loss on the distribution of 300 Gulf Boulevard to Mr.
Salem from Gulf Properties, nor did they report any interest
income from SS&N related to the loans or from any deposits with
the bank. The Salems filed a Form 1045, Application for
Tentative Refund, for the taxable year 1987 claiming a net
operating loss carryback of $127,465 from 1990.
The Saxons filed a joint return for 1990. On their return,
the Saxons claimed the $24,571 loss from SS&N allocated to Mrs.
Saxon.
E. Respondent's Determinations
In a statutory notice of deficiency dated March 7, 1995,
issued to the Salems, respondent determined that the loss from
SS&N was deductible to the extent of Mr. Salem's basis in his
SS&N stock. Respondent further determined that Mr. Salem's basis
in his stock as of January 1, 1990, was $259, and that the
Salems' income for 1990 was increased by $220,881. Additionally,
respondent determined that Mr. Salem realized a capital gain in
the amount of $59,224 from the distribution of 300 Gulf Boulevard
to him from Gulf Properties. Respondent computed the gain as
follows:
1988 purchase price of property received $600,000
Less mortgage assumed (530,900)
Distribution 69,100
Less shareholder's basis (9,876)
Capital gain 59,224
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