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New York apartment. Petitioner and Apostle did not report this
$288,000 gain, however, on Schedule D, Capital Gains and Losses,
of their original joint return. As a result of this omission,
petitioner and Apostle reported total income of only $43,210 on
their original joint return and requested a tax refund in the
amount of $4,774. Had the original joint return properly treated
the gain realized on the sale of the New York apartment,
petitioner and Apostle would have reported an income tax
liability of $110,470 for 1989 (1989 income tax liability).
The First Amended Joint Return
On or about June 12, 1992, petitioner and Apostle filed an
amended joint Form 1040X, Amended U.S. Individual Income Tax
Return, and attachments for 1989 (first amended joint return).
Katz & Katz prepared the first amended joint return.
The first amended joint return also included a Form 2119.
As on the Form 2119 that was attached to their original joint
return, petitioner and Apostle claimed the one-time exclusion
from the gain realized on the sale of the New York apartment
under section 121 and elected to defer recognition of a portion
of that gain under section 1034. Accordingly, they recognized
only $288,000 of the $564,000 gain realized on the sale of the
New York apartment.
In contrast to their original joint return, petitioner and
Apostle reported the $288,000 gain on Schedule D of their first
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