J. Clark and Mary R. Bundren - Page 7




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          claimed on their 1995 Federal income tax return,3 and that their            
          deductible loss on the sale of the 116th East Ave. property was             
          $13,406, rather than the $159,820 that petitioners claimed on               
          their 1996 Federal income tax return.  Determination of the                 
          correct adjusted basis of the 116th East Ave. property                      
          immediately after the exchange will be dispositive of these                 
          issues, as the parties have raised no other dispute about the               
          computation of petitioners’ 1995 depreciation deduction or the              
          amount of petitioners’ loss on the 1996 sale of the 116th East              
          Ave. property.                                                              
               The parties have stipulated that the exchange qualified for            
          treatment as a like-kind exchange under section 1031.                       
          Consequently, petitioners’ adjusted basis in the 116th East Ave.            
          property immediately after the exchange was:                                
          (1) Petitioners’ carryover basis in the 84th Street property                
          immediately before the exchange, decreased by (2) any money                 
          (boot) they received in the exchange, and adjusted for (3) any              
          gain or loss that was recognized on the exchange.  See sec.                 
          1031(d).  The parties agree that petitioners recognized no gain             
          or loss on the like-kind exchange.4  Accordingly, the relevant              


               3 On brief, respondent concedes that, because of a                     
          computational error in the statutory notice, the proper                     
          depreciation deduction allowable to petitioners is $1,687.50                
               4 Respondent concedes, however, that petitioners’ adjusted             
          basis in the 116th East Ave. property immediately after the                 
                                                             (continued...)           





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