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income tax purposes. The explanation further stated that the
bases are valued at the original purchase prices and the step-up
in bases given the assets at the time of transfer is not allowed.
On brief, respondent clarifies that the basis in each of the
Scudder funds is $15,000 rather than the amounts reported on the
OMK Company Trust return. Consequently, respondent contends that
the correct amount of the capital gain includable in petitioners’
income is $103,791, computed as follows:
Sale Gain
Fund Price Basis (Loss)
Scudder funds
Latin $47,755 $15,000 $32,755
Growth 32,719 15,000 17,719
Investment 64,239 15,000 49,239
Other funds
L.A. small cap 27,387 28,194 (807)
L.A. small cap 28,597 30,012 (1,415)
J. Hancock 16,052 16,142 (90)
Pilgrim 15,333 16,137 (804)
L.A. class A 32,186 24,992 7,194
Total $264,268 $160,477 $103,791
Petitioners do not challenge respondent’s revised
computation of the capital gain. We hold, therefore, that
petitioners’ income should include $103,791 of capital gain.
IV. Petitioners Failed To Substantiate Expenses Claimed as
Business Expenses of the OMK Trusts
Because the OMK trusts are disregarded, petitioners may be
entitled to deduct expenses claimed by the trusts provided the
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