Andrew E. Blanche, Jr., and Cynthia D. Blanche - Page 7




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          Hewitt for specific performance under the earnest money contract.           
          Mr. Hewitt filed a cross-claim against Lomas Mortgage and                   
          petitioners, alleging a conspiracy to deprive him of the Foxbriar           
          property and seeking back rental payments for petitioners’                  
          occupancy thereof.                                                          
               The District Court heard the case and later issued an                  
          opinion and judgment in which the District Court held that "Under           
          Texas law, * * * [petitioners had] no valid interest in the                 
          [Foxbriar] property which would have attached before the tax lien           
          was filed."7  United States v. Blanche, supra.  In other words,             
          the District Court held that petitioners had no legal or                    
          equitable title to the Foxbriar property during 1991 and 1992.              
          Respondent contends that this holding by the District Court                 
          precludes petitioners from asserting deductions in this case that           
          would depend upon petitioners' having an ownership interest in              
          the property.                                                               
               On their 1991 Federal income tax return, petitioners claimed           
          on Schedule A, Itemized Deductions (Schedule A), deductions of              
          $2,370 for real property taxes and $5,372 for mortgage interest             
          in connection with the Foxbriar property.  Additionally, on Form            

               7    The District Court did, however, award petitioners                
          $29,935.31 as restitution for improvements and repairs made to              
          the Foxbriar property as well as for amounts paid to cure the               
          mortgage default in 1992.  That award, however, was based on                
          unjust enrichment and was not based on petitioners' having an               
          ownership interest in the property.                                         





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