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Item Cost
Maintenance for 42 mos. at $150/mo. $6,300
Utilities for 42 mos. 5,985
Mortgage interest for 42 mos. 41,679
Insurance for 42 mos. 4,200
Property taxes for 42 mos. 7,059
Personal labor of 798 hrs. at $20/hr. 15,960
Payment to settle asbestos claim 1,750
Remodeling expenses in excess of $41,743 5,757
Respondent disallowed any deductions or basis adjustments for
these items on the grounds that petitioner failed to substantiate
the expenses or establish that they were incurred in the course
of his trade or business.
Rose Point Lane Property
In January 1987, petitioner purchased the Rose Point Lane
property for $495,000. In March 1996, petitioner sold the
property for $1,065,000. The Rose Point Lane property was a
waterfront residence in which petitioner and his spouse resided
from January 1988 through March 1996.
Respondent increased petitioner’s cost basis in the Rose
Point Lane property by $1,311 for certain acquisition costs and
$2,782 for costs related to refinancing the property and
decreased the basis by $66,027 to account for deferred gain from
the sale of petitioner’s previous residence.7 In computing the
7Petitioner purchased his previous residence, located at 332
4th Ave. S., Kirkland, Washington, in August 1978 for $57,000,
and petitioner sold it in January 1988 for $134,500. In
computing petitioner’s gain on the sale of the residence,
respondent increased petitioner’s basis by $140 for acquisition
(continued...)
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Last modified: May 25, 2011