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(petitioner purchased home and used it as principal residence before moving away renting home out; as rental, petitioner earned rental income and claimed depreciation; after rental activity ceased, petitioner stopped paying mortgage on home at time when mortgage exceeded petitioner’s basis in home; lender brought foreclosure action and issued petitioner Form 1099-A; IRS asserted $737 tax deficiency; petitioner claimed ordinary loss of over $100,000 and IRS claimed capital gain; foreclosure constituted sale or exchange under Treas. Reg. Sec. 1.1001-2(a)(1); depreciation claimed added to basis for purposes of gain calculation; ordinary loss not available upon abandonment of property subject to recourse or non-recourse mortgage).
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