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made to the basis of property for items such as capital
expenditures and depreciation allowed or allowable. Section 1245
relates to gains from disposition of certain properties and
provides for a depreciation adjustment.
Respondent in the notice of deficiency determined that
petitioners had a capital gain of $103,970 resulting in an
adjustment of $105,427 ($103,970 + $1,457 reported loss) from the
sale of an asset “as shown in the accompanying computation”. No
such computation was attached to the notice of deficiency in the
record.
The parties stipulated that petitioner advised the revenue
agent that the price of the Mullen Avenue property was $21,500,
and that in calculating the gain upon which the additional tax
was based, respondent used a sales price of $145,000, with
$46,000 of capital expenditures made, and depreciation incurred
during the years 1988 through 1992 of $26,470. Petitioners do
not agree with respondent’s determination.
Respondent in the trial memorandum explained that respondent
had calculated petitioners’ basis in the property at the time of
its sale in 1993 to be $41,030. The property’s original purchase
price according to petitioner was $21,500. Respondent added to
that amount $46,000, representing assumed capital expenditures of
$2,000 per year for the 23 years petitioners owned the property.
The $21,500 plus $46,000 totaled $67,500. Respondent then
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