- 36 -
tioners that amount.
On the record before us, we find that the check dated June
3, 2003, that petitioners issued to Kevin O’Malley for $54,400
does not qualify under section 108(e)(5) as a purchase price
reduction of the $318,000 price for the sale of lot 5.32
June 14, 2000 Transaction
Petitioners acknowledge that they cast the form of the June
14, 2000 transaction as a sale by petitioners of lot 12 to Edward
O’Malley for $225,000. However, it is petitioners’ position that
that transaction does not constitute a sale for tax purposes. In
support of their position, petitioners argue:
There is no debate in this case as to what tran-
spired. Shortly after acquiring their home in 1997
Petitioners endeavored to investigate the subdivision
and development of the property into lots for resale
separate from what they desired to retain for their
residence. When it was determined that the property
could be subdivided under the Anne Arundel County fam-
ily conveyance subdivision provisions, Petitioners
elicited agreements and understandings with * * * Ed-
ward O’Malley, to accept * * * Lot [12] and as regards
to Lot No. 12 an agreement and understanding with Ed-
ward O’Malley to reconvey Lot No. 12 to Petitioners at
the expiration of the five (5) year holding period.
Edward O’Malley would not benefit financially from the
development of Lot No. 12, nor would he assume any of
the benefits of, or incur any obligations associated
with, ownership of Lot No. 12. Although Edward O’Mal-
ley was legally responsible to the Bank to comply with
the terms and conditions of its first mortgage loan,
the evidence clearly establishes that Petitioners have
paid all of the debt service on the mortgage loan in
accordance with their agreement and understanding that
Edward O’Malley was only to be an accommodation party
32See supra note 21.
Page: Previous 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
Last modified: November 10, 2007