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, unless otherwise
indicated.
Some of the issues raised by the pleadings have been
disposed of by agreement of the parties, leaving for decision:
(1) Whether the interest of Jerome J. Mack (petitioner) in the
property located at 219 South Third Street, Grand Forks, North
Dakota (the Third Street property), was sold on December 28,
1987, resulting in a gain to petitioners in that year; (2)
whether petitioners had discharge of indebtedness income in 1987
from satisfaction of mortgages on the Third Street property; (3)
whether petitioners are entitled to a business bad debt deduction
in the amount of $70,000 for the taxable year 1987; (4) whether
petitioner had self-employment income subject to self-employment
tax for the taxable years 1987, 1988, and 1989; (5) whether
petitioners are liable for additions to tax for negligence under
section 6653(a)(1)(A) and (B) for 1987 and section 6653(a) for
1988, and substantial understatement of tax under section 6661
for the years 1987 and 1988 and under section 6662 for 1989.
FINDINGS OF FACT
Some of the facts have been stipulated and are found
accordingly.
Petitioners, who resided in Grand Forks, North Dakota, at
the time of the filing of their petition in this case, filed
their Federal income tax returns for the taxable years 1987,
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