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October 6, 2008. No evidence was presented at trial to show
whether petitioner ever made any payments on this note.
Petitioner contends, however, that this note evidenced or
constituted an option in his favor, and, presumably, upon payment
of the note or an election by petitioner to exercise the option,
Mr. Burns would convey title to the property to petitioner.
On February 2, 1996, petitioner executed a document wherein
he relinquished his option to purchase the property from Mr.
Burns. That document makes no reference to the $21,000
promissory note. However, petitioner contends that, when he
relinquished his option to purchase the property in 1996, that
relinquishment constituted a sale of the property to Mr. Burns,
in which the consideration or selling price was the $21,000
note.3 It is on this set of facts that petitioner reported the
transaction as the sale of a capital asset on his 1996 income tax
return (acknowledging at trial that the claimed basis was in
error and that the basis should have been $29,158, comprising the
$20,000 paid in 1989 and $9,158 in improvements). Thus,
petitioner contends he realized the claimed long-term capital
loss in 1996. Petitioner acknowledged that, after he sold the
property to Mr. Burns in 1993, he no longer used the property as
3
As the Court understands petitioner's testimony, the
consideration paid by Mr. Burns was $21,000, evidenced by a
cancellation of the $21,000 note. There is no evidence that the
$21,000 note was returned to petitioner.
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