AIZAWA V. COMMISSIONER
99 T.C. 197 (1992)
NATURE OF THE CASE: Aizawa (P), a husband and wife, appealed a determination of a
deficiency by IRS (D) of the taxpayers' federal income tax.
FACTS: Ps owned rental property which they purchased in 1981 for $120,000 plus $433 in
closing costs. At the time of purchase, they gave the sellers a $90,000 recourse mortgage
note with interest only payable at the rate of $750 monthly, and the entire principal due
and payable in June 1985. They made their last payment of interest in February 1985. P did
not make any payment on the principal when due. The sellers obtained a judgment of
$133,506.91 against Pa in a foreclosure action, consisting of $90,000 mortgage principal,
$18,000 accrued and unpaid interest, $25,000 in attorney's fees and $500 in court costs. The
property was sold to the sellers at a foreclosure sale for $72,700 which was applied to Ps'
obligation leaving a deficiency judgment of $60,806.91. Ps suffered a loss and P's basis in
the property at the time of the foreclosure sale was $100,091.38. Their dispute is with
respect to the calculation of the 'amount realized' on the foreclosure sale which should be
applied against Ps' basis, under section 1001(a), in order to determine the amount of their
loss. Ps contend that the deficiency judgment should be deducted from the unpaid mortgage
principal and that the difference of $29,193.09 ($90,000 minus $60,806.91) constitutes the
amount realized on the foreclosure sale which, when deducted from their basis, produces a
loss of $70,898.29 ($100,091.38 minus $29,193.09). D claims the $90,000 unpaid mortgage
principal constitutes the amount realized on the foreclosure sale which, when deducted from
petitioners' basis, produces a loss of $10,091.38 ($100,091.38 minus $90,000).
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
Get
free access to the entire content for Mac, PC or Online
for 2-3 days and free samples
of all kinds of products.
for 2-3 days and free samples of all kinds of products.
https://bsmsphd.com
© 2007-2016 Abn Study Partner
No comments:
Post a Comment