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under which the purchaser paid the partnership a cash downpayment
of $12,500 and gave the partnership a $187,500 promissory note.
On its 1989, 1990, and 1991 partnership Federal income tax
returns, the partnership claimed accelerated depreciation with
respect to the partnership’s tax basis in Store 5.
On its 1991 partnership Federal income tax return, the
partnership did not reflect the sale of Store 5. Rather, the
sale of Store 5 was reflected only on petitioners’ 1991 joint
Federal income tax return as an installment sale with respect to
which a capital gain for 1991 of $298 was reported.
On audit, respondent determined that the partnership’s total
$170,267 gain on the sale of Store 5 and the associated videos4
was attributable to depreciation recapture and was taxable to the
partnership for 1991 as ordinary income under section 453(i).
Under the installment sale provisions of section 453(i), it
is provided that on an installment sale, all income related
thereto that would be treated as ordinary recapture income under
sections 1245 or 1250 if received in the year of the sale, must
be treated as ordinary income as if received in the year of the
sale. See Murry v. Commissioner, T.C. Memo. 1993-471; 2 Mertens,
4 Respondent apparently computed the partnership’s $170,267
gain on the 1991 sale of Store 5 as follows: $200,000 sales
price for Store 5 less partnership’s depreciated tax basis in
Store 5 and in the associated videos of $29,733 equals $170,267.
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