James V. & Melinda S. Edmiston - Page 2

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               Respondent determined a deficiency in petitioners' 1991                
          Federal income tax in the amount of $5,018 and an accuracy-                 
          related penalty under section 6662(a) in the amount of $1,004.              
               The issues for decision are:  (1) Whether petitioners are              
          entitled to deduct for the year 1991, Schedule C expenses                   
          totaling $27,720;2 and (2) whether petitioners are liable for the           
          accuracy-related penalty under section 6662 due to negligence or            
          disregard of rules or regulations.                                          
               Some of the facts have been stipulated and are so found.               
          The Stipulation of Facts and the exhibits attached thereto are              
          incorporated herein by reference.                                           
               Petitioners resided in Redwood City, California, at the time           
          the Petition was filed.  Petitioners filed a joint individual               
          income tax return, Form 1040, for the year 1991.  Attached to the           
          return is a Schedule C for "Edmiston Enterprises" listing total             
          business expenses of $27,720.                                               
               Petitioner, Melinda S. Edmiston did not appear at trial and            
          did not sign the stipulation of facts in this case.  Respondent             
          orally moved to dismiss her for failure to properly prosecute her           
          case.  Respondent's motion will be granted.                                 

          2Petitioners' entitlement to the "Earned Income" credit                     
          under sec. 32 as well as their liability for the tax on self-               
          employment income under secs. 1401-1403 and their entitlement to            
          the deduction under sec. 164(f) of one-half the amount, if any,             
          of any self-employment tax imposed, is dependent upon our                   
          resolution of this issue.                                                   

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