Ferydoun Ahadpour, A.K.A. F. Ahadpour, and Doris Ahadpour - Page 11

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          did not report as gross income on any tax return the $57,500                
          difference between the $700,000 they received from CDC under the            
          Agreement during 1989 and 1990 and the $642,500 they paid to CDC            
          pursuant to the Mutual Release in 1992.7                                    
               During this entire period, petitioners remained in                     
          possession of Phase II and retained all benefits and burdens of             
          ownership including liability for payment of taxes and insurance.           
          It does not appear from the record that CDC ever took possession            
          of Phase II.                                                                

               Respondent contends that petitioners received the payments             
          from Escrow Holder under a claim of right, without any                      
          restrictions on their use, and, therefore, the payments are                 
          included in income in the years of receipt.                                 
               Petitioners, on the other hand, contend that since escrow              
          never closed and the sale was never consummated, the deposits               
          made by CDC are not taxable to them.  In the alternative,                   

          7  We do not have jurisdiction with regard to 1992.  We make                
          this finding of fact as to 1992 for completeness, but we draw no            
          conclusions with respect to petitioners’ tax liability for 1992             
          resulting from this transaction.                                            

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