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possible transaction involving petitioner, Mr. Walker, and the
Happy Valley property. The pertinent parts of Young’s letter to
Leavitt are as follows:
I am writing this letter on behalf of my client,
Claudia Walker, who has a significant post-decree tax
question. * * *
In the divorce decree from Clackamas County in
November 1996, Ms. Walker was awarded a $500,000
judgment against Mr. Walker. The judgment is due one
year from the date of the judgment. As long as it is
paid when due, no interest will accrue on the judgment.
* * *
Five months later, Mr. Walker is running into
financial difficulties and two of the properties, an
apartment complex and some bare land, are in the
process of being sold. * * * In regards to the bare
land, Mr. Walker holds a one-quarter interest in the
property with Mrs. Walker holding another one-quarter
interest in the property. After that sale is made,
Mr. Walker’s one-quarter interest should net him about
$200,000 from the sale.
The big question is, should Mr. Walker Quitclaim
his * * * one-quarter interest in the bare land to
Ms. Walker prior to the sale with a simple notation on
the Quitclaim Deed that the consideration is a credit
against the judgment owed to her for whatever amount
she receives from the sale, who is responsible for the
capital gains on Mr. Walker’s portion? Essentially, it
boils down to if Mr. Walker transfers his interest in
the real property to Mrs. Walker, is it a taxable event
for him, which requires him to declare the capital
gains, or whether the capital gains responsibility and
the basis carries over to Mrs. Walker so she has to pay
capital gains on the proceeds of the sale herself.
Young sent a copy of this letter to petitioner, and she reviewed
it.
On April 29, 1997, Young faxed the letter that he had sent
to Leavitt to Kelly Coburn (Coburn), petitioner’s accountant,
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