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On Schedule D, Capital Gains and Losses, of his 1996 Federal
income tax return, petitioner reported a long-term capital loss
of $20,475.44 from the sale of real estate located at Lava,
Idaho, approximately 37 miles from Pocatello. The pertinent
information on the return relative to this transaction was as
follows:
Date acquired 8/11/89
Date sold 11/7/96
Sales price $21,000
Cost or other basis $41,475.44
Loss ($20,475.44)
On the return, petitioner claimed a loss of $3,000 pursuant to
the limitation of section 1211(b)(1). In the notice of
deficiency, respondent disallowed the claimed $3,000 long-term
capital loss for the reason that the property was not used in a
trade or business or held for the production of income.
The subject property consisted of two adjoining lots at
Lava, Idaho, on which was situated a building that originally was
a residence but which petitioner contends he used on a part-time
basis in connection with his limited law practice.
At trial, petitioner readily acknowledged that his claimed
basis of $41,475.44 for the property was incorrect. Petitioner
presented documentation showing his acquisition of the property
on August 11, 1989, for $20,000. He contends that he incurred
additional costs over the years totaling $12,537 for improvements
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