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realized $230,460 in taxable capital gain on the sale of their
residence.5
During the trial of these consolidated cases involving both
petitioners and the trusts, the parties stipulated the specific
amounts that were to be collapsed from the trusts’ reported
income and expenses into petitioners’ income and expenses as
follows:
1999
Trust Income and Expenses to Be
Charged to Petitioners Amount
NHUSS Trust income $881,779
In God We Trust income adjustment (149,180)
Rental income 19,200
Cost of goods sold (230,005)
Commission expense (20,189)
Car and truck expense (10,000)
Meals and entertainment expense (4,082)
Travel expense (837)
Home office expense (417)
5 In the notice of deficiency respondent’s calculation of
petitioners’ gain on the sale of their residence was based on a
cost of $45,000 and, due to the failure of petitioners to provide
their books and records, improvements of only $14,540 for a total
cost basis of $59,540. The sale price of $790,000, less the
$59,540 cost basis, less the $500,000 exemption, equals the
$230,460 in capital gain computed by respondent in the notice of
deficiency. Once petitioners, prior to the scheduled trial,
herein, provided their books and records to respondent,
respondent agreed to an increase in petitioners’ cost basis in
the residence from $59,540 to $162,968.
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