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its value was, in great part, attributable to real property.
Petitioner did not participate in Mr. Martin’s decision to enter
into this complex transaction. At a January 30, 1987,
shareholders’ meeting for Financial and attended by petitioner,
Mr. Martin in connection with the above-described transaction
stated that, on December 31, 1986, the Primera property,
consisting of approximately 196 acres of real estate, had been
sold to Life for $115,000 per acre, or $22,500,000.
Mr. Forness prepared the 1986 and 1987 Federal income tax
returns reflecting the above-described Primera transaction for
all parties that were involved. A Form 4797, Sales of Business
Property, attached to the Martins’ 1986 joint Federal income tax
return, reflected that the Primera transaction was subject to
section 351, and therefore no gain was recognized. Petitioner
now concedes that the Primera transaction should have resulted in
gain and section 351 did not apply to cause nonrecognition. If
petitioner and Mr. Martin had filed separate returns for 1986,
petitioner would not have been required to report any portion of
the gain from the Primera transaction.
In addition to the improper section 351 transaction,
respondent made several other adjustments to arrive at
petitioner’s 1986 and 1987 income tax deficiencies, none of which
would have been attributable to petitioner but for her filing a
joint return with Mr. Martin. Extensions were obtained for
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