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herein by this reference. At the time he filed his petition,
petitioner resided in Los Angeles, California.
I. Residential Real Property
On March 29, 1985, petitioner purchased residential real
property located at 127 N. 31st Avenue, Longport, New Jersey
(Longport property), for $106,000. Petitioner, however, did not
reside at the Longport property. In 1985, petitioner expended
significant amounts in renovating the property. During and
subsequent to 1985, petitioner purchased furniture, appliances,
and various household items for the purpose of renting the
Longport property primarily as a summer vacation home. On
September 30, 1994, petitioner sold the property for $216,000.
A. Gain or Loss on Disposition of Property
In the notice of deficiency, respondent asserted that the
entire $216,000 generated from the Longport property was subject
to tax.2 Subsequent to the issuance of the notice of deficiency,
in June of 1999, petitioner filed a tax return for 1994 with the
Internal Revenue Service Center in Fresno, California. Using
Form 4797, Sales of Business Property, petitioner claimed a
$140,000 ordinary loss on the 1994 tax return with regard to the
Longport property.
In exhibits submitted to the Court, petitioner now claims
2 Respondent now concedes that petitioner is entitled to an
offset of $106,000 (subject to depreciation) for the initial
investment in the Longport property.
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