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undeveloped land to individuals, real estate companies, and
developers.
In 1974, petitioner and Mrs. Wood purchased a house in
Annandale, Virginia (the Virginia house), for $57,000. They
resided in the Virginia house until petitioner retired from the
military in 1977.
In 1976, petitioner and Mrs. Wood purchased undeveloped land
in Florida. The land remained undeveloped through the years at
issue.
When petitioner retired from the military in 1977, he and
Mrs. Wood moved to New Jersey. They sold the Virginia house for
$70,000 (incurring closing costs of $3,000 on the sale) and
purchased a house in Warren, New Jersey (the New Jersey house),
for $87,900 (incurring closing costs of $1,214.25). Petitioner
and Mrs. Wood did not report the gain from the sale of the
Virginia house on their 1977 Federal income tax return. While
living in the New Jersey house, they made capital improvements
costing $153,435.
In 1977, petitioner and Mrs. Wood purchased a 1-week
timeshare unit in Brookdale, Pennsylvania (the Brookdale
timeshare), for $7,900.
After petitioner moved to New Jersey, he was employed first
by Lockheed Electronics and then by ITT Avionics. In 1981,
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