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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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Last modified: May 25, 2011