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agent in the Modesto area since about 1987. Petitioners informed
Mr. Lilly that they already had a tenant in line to rent the
Stewart property. On June 29, 1995, the Stewart property was
listed for sale at $484,900. Sales efforts were unsuccessful,
which led to a reduction in the sales price over a 5-month period
as follows:
Date Listed for Sale Amount Listed for Sale
July 12, 1995 $469,000
September 13, 1995 459,000
November 3, 1995 435,000
Throughout this period, Mr. Lilly held two open houses and showed
the property approximately six to nine times but never received
an offer.
After the end of the lease term in June 1996, the lessee
continued to rent the Stewart property on a monthly basis from
July 1 through December 27, 1996. On December 27, 1996,
petitioners sold the Stewart property under an installment land
contract to the lessee for $435,000.2
Petitioners timely filed a joint Form 1040 for 1996. On
their return, petitioners claimed a deduction for a $39,001 loss
on the sale of the Stewart property calculated as follows:
Sales Price $435,000
Less Accumulated Depreciation 5,999
Less Basis 480,000
Total Loss (39,001)
2 So stipulated by the parties.
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