NHUSS Trust, et al. - Page 12

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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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