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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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