Lee F. Haney, Sr., and Jean C. Haney, a.k.a. Jeanie Haney - Page 2




                                        - 2 -                                         
          Penalty                                                                     
          Year        Deficiency        I.R.C. Sec. 6663                              
          2000         $106,074            $79,555.50                                 
          2001           74,841             56,130.75                                 
          2002           74,156             55,617.00                                 
               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.  After concessions, the issues for decision are:                 
               (1) Whether petitioner’s solely owned S corporation received           
          and failed to report taxable income for taxable years 2000, 2001,           
          and 2002;                                                                   
               (2) whether petitioners are entitled to reductions in their            
          Federal taxable income for 2000 attributable to additional                  
          Employee Embezzlement Account deductions that were not claimed on           
          their return;                                                               
               (3) whether various deductions claimed as business expenses            
          of petitioner’s solely owned corporation should be disallowed as            
          personal expenses of petitioners or for failure to substantiate;            
               (4) whether petitioners are entitled to disallowed                     
          deductions relating to their racing activities; and                         
               (5) whether petitioners are liable for the fraud penalty               
          pursuant to section 6663 for the years in issue or, in the                  
          alternative, whether petitioners are liable for the accuracy-               
          related penalty pursuant to section 6662.                                   








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