Benjamin B. and Dorina Micorescu - Page 2

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            the years 1992, 1993, and 1994 in the amounts of $2,222, $4,392,                            
            and $5,906, respectively.                                                                   
                  After concessions by the parties,2 the issues for decision                            
            are:  (1) Whether petitioners are entitled to exclude from income                           
            the receipt of certain payments for adult foster home care; and                             
            (2) whether adult foster home care business expenses were                                   
            correctly allocated by respondent to nonexempt adult foster home                            
            care income.                                                                                
                  Many of the facts have been stipulated and are so found.                              
            The stipulation of facts and the attached exhibits are                                      
            incorporated herein by reference.  Petitioners resided in                                   
            Portland, Oregon, at the time they filed their petition in this                             
            case.                                                                                       
                                             Background                                                 
                  During the years 1992, 1993, and 1994, petitioners were in                            
            the trade or business of providing adult foster home care for                               
            individuals in Portland, Oregon.                                                            
                  Petitioners were licensed by the Multnomah County Aging                               
            Services Division (ASD) as Level III adult foster home providers                            
            and were subject to Multnomah County Administrative Rules.  ASD                             
            is an instrumentality of the State of Oregon that acts as a                                 


                  2The parties agree on the amount of "other expenses" that is                          
            deductible by petitioners.  The parties agree that certain of                               
            petitioners' claimed expenses related to their adult foster home                            
            are subject to the rules of sec. 280A.                                                      




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