Orin F. Farnsworth and Mary L. Farnsworth - Page 9




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          $20,513.68, and (2) the remaining balance of $5,196.53 on the               
          Fredy Fourby loan guaranty, resulting in a net "contract value"             
          of $736,029.79.                                                             
               Pursuant to the DMAA and the divorce decree,                           
          Farmers made the following “contract value” payments during                 
          taxable years 1995 and 1996:                                                

                                 Orin        Gloria                                   
                              Farnsworth    Farnsworth       Total                    
          Mar. 2, 1995       $161,780.38  $83,562.88     $245,343.26                  
          July 31, 1995      161,780.38   83,562.88    245,343.26                     
          Jan. 31, 1996      161,780.39   83,562.88    245,343.27                     
          Total              485,341.15  250,688.64    736,029.79                     
               Petitioners reported a taxable gain of $263,156 on Form                
          4797, Sales of Business Property, and Form 6252, Installment Sale           
          Income, attached to their Form 1040 for taxable year 1995.                  
          Petitioners reported the total gross “contract value”, amounting            
          to $761,740, which amount included:  (1) All payments made to Mr.           
          Farnsworth in taxable years 1995 and 1996; (2) all payments made            
          to Orin Farnsworth's former wife, Gloria Farnsworth; (3) the                
          canceled credit union loan valued at $20,513.68, which was offset           
          by Farmers; and (4) the Fred Fourby loan guaranty of $5,196.53,             
          which was also offset by Farmers.                                           
               Petitioners reduced the gross “contract value” of $761,740             
          by $373,560 for “cost or other basis of property sold”.  The                
          “cost or other basis” claimed by petitioners consisted of the               






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