Claudia F. Walker - Page 6

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          seeking Coburn’s views on the tax consequences for the facts                
          stated in the letter to Leavitt.  Petitioner and Mr. Walker had             
          been clients of Coburn’s firm for many years, and Coburn                    
          continued to prepare their individual tax returns after their               
          divorce.  On May 1, 1997, Coburn wrote a response to Young.  The            
          pertinent parts of Coburn’s response are as follows:                        
               I received your fax of a letter you sent to Gary                       
               Leavitt regarding a possible transfer of properties                    
               from Bert to Claudia prior to their sale.  If the                      
               transfers occur within one year of the divorce, it is                  
               clear that Internal Revenue Code Section 1041 would                    
               apply.  No gain or loss would be reported by Bert                      
               Walker, and Claudia Walker would take his basis in the                 
               property as her own.  Therefore, she would be                          
               responsible for any income taxes due on a subsequent                   
               sale.  [Emphasis added.]                                               
               There are a couple of alternatives that could be                       
               considered.  First, since Claudia will probably have                   
               little other income in 1997, she may be in a lower tax                 
               bracket than Bert and thus would pay less income tax on                
               the gains than Bert would.  If Claudia were to accept                  
               an assignment of the properties, Bert could perhaps                    
               agree to reimburse her for the income tax due on the                   
               gains.                                                                 
               Or, since Claudia holds trust deeds on these                           
               properties, it should be possible for the escrow                       
               instructions to provide for a payment of some or all of                
               the proceeds from the sales, even though Bert would be                 
               the seller.  In that case, Bert would remain                           
               responsible for the income taxes on any gain.  If this                 
               were done, Bert may wish to retain a portion of the                    
               proceeds, in order to pay the income taxes on the                      
               gains.                                                                 
          Coburn sent copies of his response to Young’s letter to both                
          petitioner and Mr. Walker, and petitioner reviewed her copy of              
          his response.                                                               






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