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June 14, 2000, until at least the time of the trial in this case
in early 2006, Edward O’Malley did not (a) make any payments to
F&M Bank on the $180,000 F&M Bank 2000 loan or the refinanced F&M
Bank 2000 loan, (b) make any payments on the second loan with
respect to lot 12, or (c) live on lot 12; (2) petitioners paid
all the expenses relating to lot 12, including all real property
taxes; and (3) sometime after June 14, 2000, and before September
15, 2004, petitioners forgave the second loan with respect to lot
12.
On the record before us, we find that petitioners have
carried their burden of showing by strong proof that the form of
the June 14, 2000 transaction does not reflect the substance of
that transaction. On that record, we further find that petition-
ers have carried their burden of showing by strong proof that,
after the June 14, 2000 transaction, petitioners retained the
benefits and burdens of ownership with respect to lot 12.
Based upon our examination of the entire record before us,
we find that petitioners have carried their burden of establish-
ing by strong proof that the June 14, 2000 transaction does not
constitute a sale for tax purposes. Accordingly, we reject
respondent’s determination that the June 14, 2000 transaction was
a sale of lot 12 for $225,000.
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Last modified: November 10, 2007