Web Baker was hired three years ago by the Berry Corporation
to serve as CEO for the company. As part of his employment contract, the
corporation had agreed to purchase his residence at FMV in the event the
company decided to fire him. Last year, Berry, unsatisfied with Web’s
performance, fired him and purchased the residence for $350,000. Berry
immediately listed the house with a real estate agency. Soon after the
purchase, the real estate market in the area experienced a serious decline,
especially in higher-priced homes. Berry sold the house this year for $270,000
and paid selling expenses of $12,000. How should the Berry Corporation treat
the $92,000 loss? A partial list of research sources is
• Sec. 1221
• Rev. Rut. 82-204, 1982-2 C.B. 192
• Azar Nut Co. v. CIR, 67 AFTR 2d 91-987, 91-1 USTC 1150,257
(5th Cir., 1991)s
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