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$46,217, an increased addition to tax under section 6651(a)(1) to
the amount of $2,241, and an increased penalty under section 6662
to the amount of $9,243.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable year before
the Court, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
The issues to be decided in this case are:
(1) Whether the Burlington, Connecticut, house was
petitioners' principal residence so that they may defer
recognition of the gain on the sale of that house in 1989 under
section 1034;
(2) if not, what was the amount of petitioners' gain on the
sale of the Burlington house that must be recognized in 1989;1
(3) whether petitioners are liable for the addition to tax
under section 6651(a)(1); and
(4) whether petitioners are liable for the accuracy-related
penalty under section 6662.
1 The parties have phrased this issue as the determination
of petitioners' basis; however, both parties have presented
evidence and arguments concerning other elements of the
calculation of gain and treated these as components of basis.
Although the outcome will be the same, in the interest of
technical clarity, we shall treat this as a question of the
amount of gain.
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