Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 69-83

1969-1 C.B. 202

Sec. 1038

IRS Headnote

The nonrecognition provisions of section 1038 of the Code do not apply to a reconveyance of real property to the estate of the deceased seller.

Full Text

Rev. Rul. 69-83

An individual taxpayer sold unimproved real property. At settlement, he received a down payment plus a note secured by a first mortgage on the property sold. After three payments became due and were timely received, the taxpayer died. In a subsequent year, the purchaser was unable to satisfy the balance of his note. As a result, he conveyed the property in question to the decedent's estate in full satisfaction of the unpaid balance due on the note. Held, section 1038 of the Internal Revenue Code of 1954 has no application since the reconveyance is to the decedent's estate rather than to the decedent. Hence, any gain or loss on the transaction is recognized to the estate.