Karen Y. Nielsen - Page 1

                                          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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