James Anthony Johnson - Page 7




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          Petitioner contends that he may defer recognition of gain under             
          section 1034 because he timely bought a replacement residence.              
          We disagree.                                                                
               The adjusted sale price of petitioner's old residence                  
          ($208,387) exceeded the cost of his new residence ($36,292) by              
          $172,095.  Petitioner may not defer recognition of any of the               
          gain because the gain on the sale of his old residence ($71,001)            
          is less than the difference between the adjusted sale price of              
          the old residence and the cost of the new residence.                        
               Petitioner contends that he had a cost basis in the                    
          residence at 3545 Sierra Lane equal to its net sale price because           
          he used his own labor to build it and improve the property and              
          his labor was worth $208,387, and he contends that respondent               
          bears the burden of proving that petitioner's assertions are                
          incorrect.                                                                  
               We disagree.  Petitioner's basis in his labor is zero.  See            
          sec. 1012.  Petitioner bears the burden of proving that                     
          respondent's deficiency determination is in error.  See Rule                
          142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).                       
          B.   Dividend Income                                                        
               Gross income includes dividends.  See sec. 61(a)(7).                   
          Petitioner offered no evidence to dispute respondent's                      
          determination that he received, but did not report, dividends of            








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