Paul D. and Joyce E. Krause - Page 2

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          notice of deficiency.  The sole issue for decision is whether                 
          petitioners are entitled to report gain realized from the sale of             
          real estate under the installment method pursuant to section 453              
          when petitioners, on their 1994 income tax return, reported the               
          gain in full as a completed sale.                                             
               Some of the facts were stipulated.  Those facts, with the                
          annexed exhibits, are so found and are incorporated herein by                 
          reference.  At the time the petition was filed, petitioners'                  
          legal residence was Albuquerque, New Mexico.                                  
               During 1994, petitioners sold three real estate properties,              
          the consideration for which was to be paid to them for a period               
          or periods extending beyond the year of sale.  The parties                    
          stipulated that these properties were sold "under an installment              
          method".  On their Federal income tax return for 1994,                        
          petitioners reported the sales on a Schedule D, Capital Gains and             
          Losses, as long-term capital gains.  Their tax liability for 1994             
          was based upon the entire gain realized from the sales of their               
          properties.  Respondent determined that petitioners underreported             
          the gain realized from one of the properties, and petitioners                 
          have conceded that determination, as noted above.  Petitioners                
          chose to include the entire gains realized from the sales of                  
          their real estate properties on their 1994 return because they                
          had incurred and claimed a section 179 expense during 1994 of                 
          $17,500 that would substantially offset or mitigate the tax on                

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