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Respondent determined deficiencies of $1,905 and $2,791 in
petitioners’ 1996 and 1997 Federal income taxes, respectively.
After a concession by respondent,2 the issue is whether
petitioners are entitled to deduct certain business expenses on
their 1996 Federal income tax return. Petitioners resided in
Palmyra, Virginia, when the petition was filed.
Background
The facts may be summarized as follows. In 1986,
petitioners purchased a house in Cumberland, Virginia (the
Cumberland house). They rented the property from the time of its
purchase until December 1995. In January 1996, the Cumberland
house was listed for sale. The Cumberland house remained on the
market for sale until August 1996, at which time petitioners
moved in and it then became their primary residence. Petitioners
resided at the Cumberland house until April 1997.
Prior to converting the Cumberland house into their primary
residence, petitioners owned and resided in a house in Falls
Church, Virginia (the Falls Church house). The sale of the Falls
Church house in August 1996, precipitated their move to the
Cumberland house. A gain of $162,215 from the sale of the Falls
Church house was rolled over into a new residence that was under
construction in Fluvanna County, Virginia (the Palmyra house).
2 Respondent concedes that there is no deficiency due from
petitioners for the 1997 taxable year.
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