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Background
Some of the facts are stipulated and are so found. The
stipulated facts and the exhibits submitted therewith are
incorporated herein by this reference. Petitioners resided in
Ionia, Michigan, when they petitioned the Court.
Petitioner has been a real estate broker for over 20 years.
He was self-employed during 1992 and reported the income and
expenses of his business for Federal income tax purposes on a
Schedule C. Gayle R. Stevenson was employed by the Ionia County
Health Department.
On May 18, 1973, petitioners purchased lots 24 and 25 (the
lots) of a development known as Meadowland Estates #1 for $4,900
($2,450 per lot). Petitioners held the lots for investment and
not in connection with petitioner's real estate business. In
1992, petitioners sold both parcels for a contract price of
$28,000. The title company which handled the closing reduced
the proceeds remitted to petitioners by $208 in selling expenses
and by $1,557 in delinquent taxes on the property for 1988
through 1991.
Petitioners filed their 1992 Federal income tax return on
January 19, 1995. Petitioners did not report any income or gain
from the sale of the lots. Petitioners claimed total Schedule A
itemized deductions of $11,305, comprising $1,292 in medical
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