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Except as otherwise provided, the entire amount of the gain or
loss on the sale or exchange of property shall be recognized in
the year of the sale. Secs. 61(a)(3), 1001(c).
While petitioner agrees with respondent that tax is due on
the proceeds of $199,375, petitioner disagrees as to the timing
of the inclusion of the gain. Petitioner argues, among other
things, that the Securities Act of 1933 (Securities Act) requires
Colorcom to sell the partnership units and that petitioner could
not legally deposit the proceeds into his personal account in
2001. Securities Act of 1933, ch. 38, secs. 77a-77bbbb, 48 Stat.
74, currently codified at 15 U.S.C. secs. 77a-77bbbb (2000).
Respondent contends that petitioners must recognize gain on
the entire $199,375 of proceeds from the sale of the partnership
units in 2001 because the units had an adjusted basis of zero,
and no other theory operates to exclude the proceeds from taxable
income. We agree with respondent.
A. Basis
Respondent contends that petitioner has a zero basis in the
Colorcom units he sold. On the original return, petitioner
listed a zero basis for the units sold. On the first amended
return, petitioner lists the units as having a basis of $184,375,
the amount of the outstanding account payable from CDM to
petitioner. On the second amended return, petitioner lists a
portion of the units as having a basis of zero. Petitioner bears
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