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Accordingly, we sustain respondent’s determination that
petitioners’ carryover basis in the 84th Street property was
$134,500.
2. Boot Received by Petitioners in the Exchange
Respondent asserts that petitioners received $67,000 boot in
the exchange, representing the difference between the $134,500
sales price paid by Youngblood for the 84th Street property and
the $67,500 sales price paid by petitioners for the 116th East
Avenue property. On their 1995 and 1996 Federal income tax
returns, petitioners’ tax treatment of the 116th East Avenue
property was predicated on the assumption that they received no
boot on the exchange. On brief, without explanation, petitioners
compute the basis of the 116th East Ave. property by treating as
boot $70,244, representing the difference in petitioners’
$126,074 mortgage on the 84th Street property and the $55,830
cash payment that Youngblood made at the closing of the exchange.
6(...continued)
testimony regarding the appraisal value was admitted over
respondent’s timely hearsay objection because petitioners stated
that they were offering the testimony not to prove the truth of
the matter contained in the statement (i.e., the fair market
value of the 84th Street property at the time of the conversion),
but merely to establish the manner in which Walters determined
the tax treatment of the 116th East Ave. property. For this
limited purpose, the testimony is not hearsay within the
definition of rule 801(c) of the Federal Rules of Evidence. On
brief, however, petitioners attempt to use Walters’ testimony to
evidence the fair market value of the 84th Street property. For
this purpose, the testimony is inadmissible hearsay. See Fed. R.
Evid. 801(c).
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