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Respondent determined a deficiency of $10,289 in
petitioners’ Federal income tax for the year 1999. The sole
issue for decision is the basis of petitioner Susan Bettencourt’s
one-third interest in a house she inherited from her father.
Some of the facts were stipulated. Those facts, with the
exhibits annexed thereto, are so found and made part hereof.
Petitioners’ legal residence at the time the petition was filed
was Grants Pass, Oregon.
In 1981, petitioner wife (Mrs. Bettencourt) and her two
siblings inherited a personal residence (residence) with a fair
market value of $135,000 from her father. Mrs. Bettencourt’s
interest was one-third of the residence. Mrs. Bettencourt’s
mother died in 1976, and her father remarried. He died in 1981.
Mrs. Bettencourt’s stepmother (Mrs. Hatch) survived her spouse
and was still living in the residence. Mrs. Bettencourt and her
siblings entered into a living probate homestead (homestead)
enabling Mrs. Hatch to reside in the residence, rent free, for as
long as she desired. Mrs. Hatch, however, did not receive any
ownership interest under this arrangement and was prohibited from
renting the house to third parties. According to the terms of
the homestead, when Mrs. Hatch either died or moved away, Mrs.
Bettencourt and her siblings would be free to sell the residence.
Mrs. Hatch suffered from multiple sclerosis and, sometime in
1993, became unable to live alone. She then moved away to live
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