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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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