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only a $73,651.92 ordinary loss. Petitioner computes the loss on
the sale of the Longport property by claiming an adjusted basis
of $289,651.92 in the property against the sales proceeds of
$216,000.
Petitioner computes the $289,651.92 adjusted basis for the
Longport property as follows:
Initial Purchase Price $106,000.00
+Improvements & Repairs
1985 $27,496.58
1986 1,371.05
1987 1,525.32
1988 3,500.44
1989 881.37
1990 304.07
1991 2,117.00
1992 0.00
1993 5,637.07
1994 6,370.40
Total 49,203.30
+Costs in Anticipation of Sale 2,250.00
+Closing Costs of Sale 12,834.31
+Personal Property 10,509.89
+1994 Operating Costs 13,306.08
+Section 263A Capitalization 105,548.34
Adjusted Basis 289,651.92
1 Respondent concedes that these costs should be
allowed to petitioner.
Petitioner contends that because he engages in the trade or
business of restoring homes and historical properties for the
purpose of resale, he was obligated to capitalize all the amounts
allegedly expended on the Longport property into the adjusted
basis of the property. Specifically, petitioner asserts that
section 263A requires capitalization of various operating
expenditures (such as insurance, refinancing, interest, and real
estate tax expenses allegedly paid from 1987 to 1993).
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