115 T.C. No. 42
UNITED STATES TAX COURT
JAMES W. AND LAURA L. KEITH, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11426-98. Filed December 28, 2000.
Prior to and during the years in issue, GIA, a
proprietorship owned by P wife, sold residential real
property by means of contracts for deed. Under these
agreements, the buyers obtained possession; assumed
responsibility for taxes, insurance, and maintenance;
and became obligated to make monthly payments, with
interest, of the purchase price. A warranty deed
would be delivered to the buyers by GIA only upon full
payment, and any default by the buyers prior thereto
would render the contracts null and void, with GIA
retaining all amounts paid as liquidated damages.
In accounting for these transactions, Ps reported
the gain attributable to the contracts for deed in the
year in which full payment was received and title
transferred. Only interest payments were included in
income for tax purposes until such time. GIA also
depreciated the subject properties during the term of
each contract.
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