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$8.9 million and $3.73 million, respectively.4 At the time of
the sales, Times had a $15,602,152 adjusted basis in Kupuohi I
and a $1,502,960 adjusted basis in Kaahumanu. Times realized a
$6,453,372 capital loss on the sale of Kupuohi I but did not
recognize this loss on its tax return because of the restriction
on transactions between related taxpayers under section 267.5
Times realized and recognized a $2,227,040 gain on the sale of
Kaahumanu.
At some point, TGE transferred Kupuohi I and Kaahumanu to
Teruya. As of the date the petition was filed, Teruya still
owned these properties.
II. Federal Income Tax Return
Petitioner filed Form 1120, U.S. Corporation Income Tax
Return, for its taxable year beginning April 1, 1995, and ending
March 31, 1996. Under section 1031(a)(1), petitioner deferred
$1,345,169 in realized gain from the Ocean Vista transaction
(after deducting claimed selling expenses of $30,061) and
4 The proceeds from the sale of Royal Towers ($11,932,000)
and the additional funds from Teruya ($724,554) total
$12,656,554. The agreed sale price for Kupuohi I ($8.9 million)
and Kaahumanu ($3.73 million), however, totaled $12,630,000. The
parties do not explain this seeming discrepancy.
5 The parties stipulated the $6,453,372 realized capital
loss on the sale of Kupuohi I; however, on the basis of the $8.9
million sale price and the $15,602,152 adjusted basis that the
parties stipulated, it appears that the loss realized was
actually $6,702,152. The parties do not address this seeming
discrepancy.
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