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D. Capital Gain for 1989
On their return for 1989, petitioners reported the sale of
property from which they realized a long-term gain of $3,421
(sales price of $40,000 less basis of $36,579). Respondent
contends that Frank and Katherine had a short-term gain of
$23,978 ($40,000 less mortgage payoff of $11,030 and expenses of
sale of $4,989).
In their reply brief, petitioners claim that Frank and
Katherine’s daughter Patricia transferred the subject property to
them for no consideration at a time when she had an adjusted
basis in the property of at least $30,000. Petitioners contend
that she gifted the property to Frank; therefore, he had the same
basis and holding period for the property as she did.
Petitioners contend further that Frank’s adjusted basis in the
property, at a minimum, was $34,990 ($30,000 basis plus $4,990
expenses of sale). They maintain that Frank’s daughter may have
had an additional basis of $1,590 in the property which accounts
for the $36,579 basis claimed on the 1989 tax return. Respondent
asserts that petitioners have offered no evidence establishing
that Frank and Katherine had a basis of more than $11,030 in the
property they sold in 1989.
The record indicates that Frank acquired his interest in the
property by quitclaim deed from a Patricia Johnson on March 18,
1989, for no stated consideration, and that he sold that property
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