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Description Cost1
Closing costs2 $ 6,133
Legal & other miscellaneous expenses 5,400
Travel costs for annual property inspection 10,450
Improvements 23,442
Total $45,425
1The amounts listed represent the one-third portion claimed
by petitioners on their 1999 Federal income tax return.
2In the notice of deficiency, respondent increased
petitioners’ basis by closing costs of $6,041.
Petitioners testified that the improvements consisted of a
new deck, new front door and roof, new windows, remodeled kitchen
and bathroom, updated landscaping, and earthquake damage repairs,
the date or dates for which were not known by petitioners.
Petitioners admit that Mrs. Hatch paid for the bulk of the
improvements made to the residence but assert that Mrs. Hatch did
so as a gift to petitioners. Respondent, however, contends that
petitioners are not entitled to increase their basis by the
amounts of the improvements reported because the amounts were not
substantiated, and, even if they had been substantiated, Mrs.
Hatch paid for them not as a gift to petitioners but for her own
personal enjoyment and to maintain the property in a livable
state. The Court agrees with respondent on this issue.
Petitioner offered into evidence at trial a ledger listing
various amounts with corresponding check numbers totaling
$5,517.68; however, there was no description as to what these
amounts were for. Petitioners also acknowledged they did not
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Last modified: May 25, 2011