Thomas C. Sandoval, Jr. and Bobbie J. Sandoval - Page 10

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          1997, petitioners reported nonpassive income or loss relating to            
          TGR II in the partnership income section.                                   
          A.   Whether Petitioners Have a Basis of $233,408 in the Storage            
               and Office Additions to the Hoefgen Avenue Property                    
               Petitioners contend that they paid $233,408 in the early               
          1980's to add storage and office space to the Hoefgen Avenue                
          property.  Respondent contends that petitioners have failed to              
          show that they are entitled to any basis in the additions to the            
          Hoefgen Avenue property.2                                                   
               Petitioners rely in part on Zamora’s and Neal’s testimony to           
          substantiate their basis for the storage and office additions.3             
          Zamora credibly testified that he designed and oversaw the                  
          construction of the storage addition at the Hoefgen Avenue                  
          property in 1981 and 1982, and the office addition in 1983 and              
          1984.  Zamora testified that the storage addition was not                   
          significant because petitioners did not change the exterior or              
          roof structure of the building.  Zamora did not testify about the           
          cost of the additions.  Neal estimated that the replacement cost            

               2  Respondent allowed depreciation deductions for 15-year              
          property costing $22,895, for 5-year property costing $12,083,              
          and for 3-year property costing $48,044, which petitioners                  
          reported on their 1982 return was placed in service in 1981 and             
               3  Petitioners offered no evidence to prove their contention           
          that they lost petitioner’s records when moving to the Jones                
          Maltsberger Road property.                                                  

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