- 8 - issues are those described in (1) and (2) above. We address each of these issues in turn. 1. Petitioners’ Carryover Basis in the 84th Street Property The parties appear to agree that petitioners’ basis in the 84th Street property immediately before the exchange in December 1994 was unchanged from the time the property was converted from personal to business use in the spring of 1994. At the time of the conversion, petitioners’ basis in the 84th Street property was the lesser of the then fair market value or the adjusted cost basis. See Heiner v. Tindle, 276 U.S. 582 (1928); Higgins v. Commissioner, T.C. Memo. 1995-139; Frahm v. Commissioner, T.C. Memo. 1974-138; sec. 1.165-9(b)(2), Income Tax Regs. Respondent contends, and petitioners do not dispute, that the fair market value of the 84th Street property at the time of conversion was less than cost, which was at least $233,130.5 The question, then, is what the fair market value of the 84th Street property was when petitioners converted it from personal to business use. “Fair market value” is defined as “the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and 4(...continued) exchange includes $10,668 in closing costs. 5 This amount represents petitioners’ total investment in the 84th Street property (i.e., the $183,000 paid by petitioners to purchase the property plus the approximately $50,130 they spent to improve the property).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011