James W. and Laura L. Keith - Page 2




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                    Held:  Each contract for deed effected a completed                
               sale for tax purposes in the year of execution, and                    
               income attributable to such disposition must be                        
               recognized and reported for that taxable year.                         
                    Held, further, the net operating loss carryovers                  
               claimed by Ps must be adjusted to take into account                    
               income which should have been reported in years                        
               preceding those at issue, for contracts entered during                 
               such prior periods.                                                    
                    Held, further, Baertschi v. Commissioner, 49 T.C.                 
               289 (1967), revd. 412 F.2d 494 (6th Cir. 1969), will no                
               longer be followed.                                                    

               William J. White, for petitioners.                                     
               Nancy E. Hooten and Mark S. Mesler, for respondent.                    

                                       OPINION                                        

               NIMS, Judge:  Respondent determined the following                      
          deficiencies and penalties with respect to petitioners’ Federal             
          income taxes for the taxable years 1993, 1994, and 1995:                    

                 Taxable             Income Tax              Penalty                  
                   Year              Deficiency           Sec. 6662(a)                
                   1993              $74,925.00              $14,985                  
                   1994              127,304.00              25,461                   
                   1995              106,261.54              21,252                   

               After concessions, the issues remaining for decision are:              
               (1) The proper method of accounting for, and timing of                 
          recognition of gain attributable to, sales of property by means             
          of contracts for deed; and                                                  






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