Edward and Ruth Kelly - Page 3

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            deductible as ordinary and necessary business expenses.  We hold                              
            that the earned commissions were taxable as ordinary income, and                              
            that the paid commissions are added to the basis of options                                   
            purchased and treated as an offset to the price of options sold.                              
                  (3) Whether petitioners were entitled to deduct certain                                 
            unreimbursed employee business expenses.  We hold that the                                    
            deductions were properly disallowed.                                                          
                  (4) Whether petitioners are liable for additions to tax                                 
            under sections 6653(a) and 6661 and accuracy-related penalties                                
            under section 6662(a), (b)(1) and (2).  We hold that petitioners                              
            are so liable.                                                                                
                  (5) Whether petitioner Ruth Kelly (Mrs. Kelly) is entitled                              
            to relief from liability as an innocent spouse.  We hold that she                             
            is not entitled to innocent spouse relief.4                                                   

                                           FINDINGS OF FACT                                               
                  Some of the facts have been stipulated and are so found.                                
            The stipulation of facts and attached exhibits are incorporated                               
            herein by this reference.  Petitioners filed joint Federal income                             
            tax returns, as husband and wife, for each of the years at issue.                             
            At the time the petitions were filed, they resided in Brentwood,                              
            New York.                                                                                     

            4On most issues petitioners have a conflict of interest.                                      
            Mrs. Kelly joined her husband only with respect to issue (2).                                 

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