What is the Issue, Rule, Analysis, and Conclusion in this problem? IRAC FORMAT.

242 PROBLEM 120 Prepare yourself to make a by the taxpayers' attorney on their behalf. office. District Director of Internal Revenue Newark, New Jersey 00 As a group supervisor in the office of the District Director in Newark, New Jersey, you have been asked to review the following protest submitted recommendation as to how the issue involved should be handled by your It is requested that this case be transferred to the Regional Office of Appeals and that an oral conference be arranged at a time assessment of Federal income tax deficiencies with respect to this Protest is PROTEST The undersigned, Willis A. Turner and Irene F. Turner, respectfully protest against a proposed assessment of Federal income tax for the taxable year ended December 31, Year-1 as set forth in a letter addressed to them dated September 6, Year and signed by Henry D. Count, District Director of Internal Revenue, Newark, New Jersey. (a) The names of the Taxpayers are Willis A. Turner and Irene F. Turner , and their address is 1099 Margaret Street, Teaneck, New Jersey 07666. (b) convenient to that office. (c) The letter advising the Taxpayers of the In the Matter of the Federal Income Tax Liability of Willis A. Turner and Irene F. Turner Social Security No. 151-29-1738 for the Taxable Year ended December 31, Year-1 proposed Pl. F (d) (e) Item (1) ground: dated September 6, Year and designated by the symbols "AH:T:30B". The report of Internal Revenue Agent Heinreich de kosmian is attached thereto. filed a joint return, is the taxable year ended December 31, Year-1. which the Taxpayers take exception is as follows: property between spouses. Section 1041(b) provides that in the case of BASIS AND ADJUSTED BASIS 243 The year involved in this Protest, for which the Taxpayers The amount of the adjustment proposed to be made and to Amount $16,000 disallowed loss on Subdivision Tract The agent disallowed the above deduction on the following d Inc. of (1) Property in question was sold at a loss between spouses, which loss was disallowed under $ 267. When the property was subsequently sold to a third party, the basis should have been limited to 1012 basis or the 267(d) basis if greater or under $ 1041 treated as a gift with the basis determined under $ 1015(a). Loss on Subdivision Tract Mr. and Mrs. Turner have held singly and jointly various tracts of land which they have subdivided and sold to customers in the course of their trade or business. The tract in question was originally purchased by Mr. Turner for $40,000 on January 14, Year-4. On March 3, Year-1, Mr. Turner, at the request of his individual creditors, sold the tract to Mrs. Turner for $20,000. Since the transaction took place between spouses, no loss was claimed by the Taxpayers pursuant to $ 1041. On December 4, Year-1, Mrs. Turner sold the tract in question for $24,000 to Heritage Construction, Section 1041(a) provides for the nonrecognition of loss on transfers any transfers described in 1041(a), nal ne "(1) for purposes of this subtitle, the property shall be treated as acquired by the transferee by gift , and (2) the basis of the transferee shall be the adjusted basis sed tis of the transferor". documents and statements made by the Taxpayers, he believes such SALES AND DISPO 244 Section 1041 is clear on its face. Under it Mrs. Turner was entitled to take Mr. Turner's adjusted basis of $40,000 in the tract in question. On its Section 267(d) nor Section 1015(a) should be deemed to apply to result in a sale for $24,000, she was entitled to claim a loss of $16,000. Neither basis of $24,000 when the property was sold. It is a well established rule that where two statutory provisions describe a particular occurrence, the more specific provision shall be deemed to apply. See, Sutherland, 2A Statutes and Statutory Construction SS 46.04 & 47.11 (4th ed. N. Singer of the foregoing Protest. While he does not know of his knowledge whether The undersigned, PETER C. CANELLOS, assisted in the preparation the information contained therein is true, on the basis of a review of Respectfully submitted, Willis A. Turner Willis A. Turner Irene F. Turner Irene F. Turner September 23, Year STATEMENT OF ATTORNEY 1972-73). Therefore, under $ 1041(b), Mrs. Turner is entitled to a basis of $40,000 in the tract resulting in a loss of $16,000 for the year in question. For the foregoing reasons, the Taxpayers respectfully protest against the above mentioned portion of the proposed assessment of Federal income tax deficiencies for their taxable year ending December 31, Year-1. The Taxpayers certify under the penalties of perjury that the statements of fact contained herein are true to the best of their knowledge, information and belief. information to be true. Peter C. Canellos Peter Canellos