Robin A. and Susan D. Bettencourt - Page 4

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          with her son and began renting the residence to a third party.2             
          Petitioners did not receive any portion of the rent paid by the             
          tenant.  Petitioners and Mrs. Bettencourt’s siblings then hired             
          an attorney to perfect title and evict the renters.  Upon                   
          perfection of title, which had the effect of terminating the                
          homestead, Mrs. Bettencourt and her siblings sold the residence             
          for $400,000.  Petitioners received approximately $133,333 for              
          Mrs. Bettencourt’s interest in the residence.                               
               Petitioner husband (Mr. Bettencourt) is a certified public             
          accountant and has been practicing since 1969.  He prepared                 
          petitioners’ 1999 Federal income tax return, which was filed                
          timely.  On Schedule D of the return, Capital Gains and Losses,             
          petitioners listed a sale price of $133,333 and a basis of                  
          $101,485 for Mrs. Bettencourt’s interest in the residence,                  
          resulting in a $31,848 gain on the sale.  Respondent decreased by           
          $50,444 the basis of the residence reported by petitioners.3                




               2The stipulation of facts states that Mrs. Hatch resided on            
          the property until 1999, when petitioners sold the residence.               
          Petitioners testified at trial that Mrs. Hatch actually vacated             
          the house in 1993 and began renting it to a third party.  The               
          Court accepts petitioners’ testimony as to the date Mrs. Hatch              
          vacated the residence.                                                      
               3Respondent determined a $51,041 adjusted basis in the                 
          property, which included the basis petitioners had in the                   
          property in 1981, $45,000, plus petitioners’ one-third portion of           
          the $18,123 Mrs. Bettencourt and her siblings paid as closing               
          costs when the house was sold, $6,041.                                      




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