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copies of Mr. Schmitt's tax returns, and respondent does not
dispute their authenticity. V&V issued Forms 1099 stating that
it paid Mr. Schmitt $1,470 in 1988 and $1,579 in 1989. Mr.
Schmitt explained that V&V reported on the Forms 1099 only the
payments made by check, not cash. As a result, we conclude that
V&V made cash payments to Mr. Schmitt of $7,850 in 1988 and
$10,381 in 1989. Petitioners have failed, however, to establish
the amount of any other cash expenditures that V&V made to
subcontractors.
III. Depreciation Deduction for Rental Property
Petitioners contend that for 1988 they are each entitled to
a depreciation deduction of $3,269 for their rental property.
Respondent contends that petitioners have failed to establish
their basis in the property. We agree. Accordingly, we hold
that petitioners are not entitled to the depreciation deductions.
IV. The Capital Gain From the Sale of the House
On their joint 1988 Federal income tax returns, Mr. and Mrs.
Vazzana reported $348,000 realized from the sale of a house, a
basis of $333,158, and a capital gain of $14,842. Respondent
contends that their basis should be limited to $282,788 and that
their gain should be $65,212. The Vazzanas have established
(i.e., through testimony, checks, and invoices), however, that
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