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Additions to Tax Penalties
Sec. Sec. Sec. Sec.
Year Deficiency 6653(a)(1)(A)2 6653(a)(1)(B) 6661 6662
1986 $64,061 $3,203 1 $16,015 --
1987 48,593 2,430 2 9,713 --
1989 26,496 -- -- -- $5,299
1990 12,425 -- -- -- 2,485
1991 41,064 -- -- -- 8,213
1992 55,580 -- -- -- 11,116
1 Fifty percent of the interest due on $64,061
2 Fifty percent of the interest due on $38,853.
After concession by respondent of an issue raised on behalf
of petitioners at trial,3 the issues for decision are:
(1) Whether losses sustained by petitioner Edward Kelly
(Mr. Kelly) in trading stock options should be characterized as
ordinary or capital losses. We hold that they were capital
losses.
(2) Whether brokerage commissions earned by Mr. Kelly in
connection with his stock option trades may be treated as an
offset against the amount of his trading losses rather than as
ordinary income, and whether brokerage commissions paid by
Mr. Kelly in connection with his stock option trades are
2Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years at issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
3Respondent conceded that petitioners were entitled to
deduct gambling losses in an amount equal to their gambling
winnings for 1986, pursuant to sec. 165(d).
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Last modified: May 25, 2011