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The following is a summary of the relevant facts that do not
appear to be in dispute. They are stated solely for purposes of
deciding the pending motions and are not findings of fact for
this case. Fed. R. Civ. P. 52(a); Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994).
Background
Petitioner computed his income tax liability for the taxable
years 1978 and 1979 utilizing income averaging. The 4 base years
for 1978 were 1974 through 1977, and the 4 base years for 1979
were 1975 through 1978. The 1978 and 1979 Federal income tax
returns were examined by respondent. On the income averaging
schedules (Schedules G) attached to the 1978 and 1979 returns,
petitioner reflected zero taxable income for 1976 and 1977.
Schedules G also reflected base period income for 1976 and 1977
as $2,2004 and zero, respectively.
A notice of deficiency was issued to petitioner for the
taxable years 1978 and 1979. The adjustments in the notice of
deficiency increased his distributive share of income from two
partnerships. The notice of deficiency did not disallow the use
of income averaging. When the 1978 and 1979 tax years were
4 The Schedule G attached to the 1978 return required a
taxpayer to add to taxable income for 1976 the exemption amount
($2,200) in order to arrive at base period income.
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