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other court, and this opinion shall not be treated as precedent
for any other case.
Respondent determined deficiencies in petitioners’ Federal
income taxes as follows: $4,248.94 for 2001, $138.33 for 2002,
and $174 for 2003. After concessions by both parties, the
principal issues remaining for decision are: (1) Whether
petitioners are entitled to deduct a loss in 2001 on the sale of
their primary residence for the portion of that sale allocable to
the workshop used in petitioners’ business, and (2) whether
petitioners are entitled to deductions in 2001, 2002, and 2003
for depreciation on a furnace and a garage workshop, both used in
their business.
Background
Some of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulation of
facts and accompanying exhibits.
At the time the petition was filed, Brian E. Mallin and
Marcie L. Mallin resided in Wyoming.
Petitioners purchased a residence in Sioux Falls, South
Dakota (the South Dakota property), in 1995. Petitioners
refinanced their house in 1998. As part of the refinancing
process, the house was appraised at $199,000. During 1999 and
2000, petitioners built a 352-square-foot workshop on this
property at a total cost of $16,179. The workshop was built as
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