Taxpayer or taxpayer's wife purchased a new residential home and on behalf of a friend who could not arrange financing. The cost of the home was approximately $117,000. The friend contributed $10,000 towards the purchase price with the taxpayer or his wife paying the rest by way of a $100,000 mortgage and $7,000 of their own funds. The friend was to make all the mortgage payments and repay the $7,000.
Less than two years later, the friend "purchased" the home for consideration of the outstanding balance of the mortgage, $7,000 and the amount of a number of mortgage payments that were missed. At that time, the appraised value of the house was $155,000.
Would the "purchase" of the home by the friend result in a capital gain for the taxpayer?
General comments provided.