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the amended return, petitioners claimed a refund of $5,420.
The notice of deficiency did not take into account the
amended return filed by petitioners, nor does it appear that the
Internal Revenue Service accepted the amended return and refunded
the claimed amount to petitioners. However, in their petition,
petitioners, while conceding the adjustments in the notice of
deficiency (see supra note 2), alleged they realized an ordinary
loss based upon the foreclosure sale, as reported on their 1989
amended return, and prayed that the Court determine that
petitioners "are due a refund in an amount to be determined by
the Court." In an amendment to answer, respondent denied that
petitioners realized a loss on the foreclosure sale, but instead
affirmatively alleged that petitioners realized an ordinary gain
from the foreclosure sale. Accordingly, respondent alleged an
increase in the deficiency in income tax from $2,044 to $4,200
and an increase in the addition to tax under section 6651(a)(1)
from $2,885 to $3,423.90. No reply was filed by petitioners to
respondent's affirmative allegations, nor did respondent move
under Rule 37(c) to have the affirmative allegations deemed
admitted. Accordingly, the affirmative allegations are deemed
denied. Rule 37(c).
On April 21, 1984, petitioner and Michael K. Kelly (Kelly)
organized Silvercrest of America Corp. (Silvercrest), an S
corporation, with each owning 50 percent of the stock. On
July 9, 1984, Silvercrest acquired, by warranty deed, a lot in
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