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C. Disposition of the Holland Spring Notes
In 1989, petitioner sold the Holland Spring notes to
Herland. At the time of that sale, petitioner’s adjusted basis
in the notes was $2,724,451. Petitioner’s unreported installment
gain on the notes was $3,189,049, which leads us to believe that,
as of the time of sale, the total unpaid principal amount of the
Holland Spring notes was $5,913,500. Petitioner testified that
he sold the Holland Spring notes to Herland for approximately
$2.5 million. He further testified that he did so because he had
never been paid any of the interest or principal due on any of
the Holland Spring notes and he needed cash. Petitioner was
credible, and respondent has introduced no evidence to impeach
petitioner’s testimony. We find that petitioner received
approximately $2.5 million on the sale of the Holland Spring
notes to Herland. Given petitioner’s adjusted basis in the notes
of $2,724,451, we find that petitioner did not realize a gain on
the disposition of the Holland Spring notes.
D. Conclusion
Petitioner realized no gain on the disposition of either the
1987 Ampel notes or the Holland Spring notes. Accordingly,
petitioner omitted no gross income from the 1989 return.
IV. Conclusion
Petitioner has not omitted gross income in excess of
25 percent of the gross income stated on the 1989 return.
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