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defense and not a bar to jurisdiction. See Rule 39. We will
deny petitioners' motion.
We turn to the substantive issues, on all of which
petitioners bear the burden of proof. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). Section 61(a) provides that
gross income includes income from whatever source derived,
including gains derived from dealings in property. See sec.
61(a)(3). The gain from the sale of property is the excess of
the amount realized over the taxpayer's adjusted basis in the
property. See sec. 1001(a). Generally, the adjusted basis in
property is its cost, see sec. 1012, and the expenses of the sale
reduce its sale price, see, e.g., Southern Pac. Transp. Co. v.
Commissioner, 75 T.C. 497, 586 n.86 (1980) (and the cases cited
therein); see also Lanrao, Inc. v. United States, 422 F.2d 481
(6th Cir. 1970). Petitioners' amount realized from the sale of
the lots was $27,792 ($28,000 - $208), and their adjusted basis
in the lots was $4,900. Petitioners, therefore, realized a
$22,892 gain on the sale, which must be recognized as a capital
gain. We sustain respondent's determination on this issue to the
extent of $22,892.
Respondent's argument that petitioners' adjusted basis in
the property was $2 is without merit. Petitioner established
through documentary and testimonial evidence that he paid $4,900
for the lots, and the language in the deeds that the
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