114 T.C. No. 10
UNITED STATES TAX COURT
KAREN Y. NIELSEN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1435-98. Filed March 8, 2000.
P’s residential property was condemned by the
State of South Dakota for purposes of a federally aided
highway construction project. In settlement of the
ensuing condemnation proceedings, P received $65,000.
Subsequently, P and the State became involved in
negotiations and litigation regarding P’s entitlement
under the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970, Pub. L. 91-
646, 84 Stat. 1894 (Relocation Act), to additional sums
enabling her to purchase a comparable replacement
dwelling. This suit was settled for $100,000. P,
relying on a provision of the Relocation Act exempting
payments thereunder from income, reported no capital
gain on the disposition of her home. R determined a
deficiency for taxes attributable to the amount by
which the $65,000 payment to petitioner exceeded her
basis in the property taken.
Held: The $65,000 received by P in condemnation
of her residence is not exempted from taxation by the
Relocation Act.
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