Paul Trans and Thuy Bich Dang - Page 4




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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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