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adjustments for the remaining expenses for lack of
substantiation.
Hollywood Hill Lot
In April 1996, petitioner purchased two adjacent parcels of
real property, one of which had a home situated on it, for
$732,500.9 Petitioner and his spouse resided in the home,
located at 16109 167th Avenue Northeast, Woodinville, Washington,
after selling the Rose Point Lane property. Petitioner improved
the empty lot adjacent to the home, the Hollywood Hill lot, by
constructing a fence around the property. In October 1999,
petitioner sold the Hollywood Hill lot for $235,000.
Respondent concluded that petitioner’s cost basis in the
Hollywood Hill lot was $185,000, approximately 25 percent of the
total purchase price of both lots.10 Respondent added to
petitioner’s cost basis $431, which represented 25 percent of the
costs incurred in the purchase of both lots, and $5,974 for the
cost of constructing a fence on the Hollywood Hill lot. In
computing the amount realized on the sale, respondent subtracted
$9,957 from the sale price to account for selling costs. Using
9The cost of purchasing the residence, taking into account
$1,294 of acquisition costs, was $548,794.
10The parties stipulated that respondent had determined that
petitioner’s basis in the Hollywood Hill lot was $185,000 and
that it was 25 percent of the combined purchase price of the two
adjacent lots. In fact, the amount respondent allowed as basis
is 25.26 percent of the combined purchase price.
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