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Petitioners did not report the section 1231 gain on their
1994 tax return. The record does not contain their 1993 tax
return.
By letter dated December 28, 1993, Bruce Stuart, Lowry
Wells’s attorney, with the consent of David Crist, attorney for
AAL, requested that the Grant Deed in escrow be recorded on or
after January 3, 1994, so that the closing would occur in tax
year 1994.
The Partnership realized a section 1231 gain of $1,549,963
on the conveyance of the Fitch Property to AAL. Petitioners’
proportionate share of the gain is $774,982.
Discussion
I. Year of Recognition of Gain Under Section 1231
Petitioners contend that the Partnership conveyance of the
Fitch Property to AAL, and the cancellation of the Partnership
indebtedness, occurred on December 15, 1993.
Respondent contends that the conveyance of the Fitch
Property by the Partnership to AAL occurred in 1994, and that
petitioners were required to recognize section 1231 gains in that
year.
Since we agree with respondent that the section 1231 gain
must be recognized in 1994, we need not address his additional
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