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assigning to ERA Golden Hills Brokers, for value received, all
beneficial interest petitioners received from Haq under the deed
of trust dated that same day. On January 22, 1993, both the deed
of trust and the assignment of the deed of trust were recorded in
Contra Costa County, California, at petitioners’ request.
Throughout 1992, petitioners made monthly mortgage payments
to Prudential Home Mortgage Co. with respect to the Danville
property, paying a total of $34,035 of mortgage interest for the
year. On August 5, 1992, petitioners filed a Chapter 7
bankruptcy petition. Petitioners maintained the mortgage loan on
the Danville property before and after their bankruptcy petition
was filed.
On their 1992 joint Federal income tax return, petitioners
reported no gain from the sale of the Danville property. They
claimed $34,035 in mortgage interest deductions with respect to
the property.
Respondent determined that petitioners sold the Danville
property to Haq in 1992 and realized taxable capital gain on the
sale. Respondent also disallowed $17,000 of petitioners’
mortgage interest deduction for tax year 1992 attributable to
interest payments made after April 30, 1992.
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