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On August 24, 1994, respondent issued a notice of deficiency
to petitioners regarding their 1989 return. In 1989, petitioners
reported $24,782 of earnings attributable to Linda, $54,036.16 of
self-employment income attributable to Ronnie, and $43,323.81 of
taxable income. Respondent determined that petitioners had
failed to report $22,715 in income from Ronnie's law practice.
Respondent also disallowed, in whole or part, several claimed
deductions (e.g., relating to personal interest, laundry,
entertainment, and other expenses). These deductions, other than
the personal interest deduction, all related to Ronnie's law
practice. The deductions were disallowed because Ronnie failed
to substantiate them. Respondent's adjustments resulted in a
disallowance of $63,198 in deductions. Based on the above
adjustments, respondent determined that petitioners had taxable
income of $129,237 and were jointly liable for a deficiency of
$30,370. Respondent also determined that they were liable,
pursuant to section 6662(a), for an accuracy-related penalty for
negligence.
On October 18, 1995, the parties filed with this Court a
Stipulation of Agreed Issues which provides that there is a
deficiency of $23,392 and that there is no penalty for
negligence. Accordingly, the only remaining issue for decision
is whether Linda, pursuant to section 6013(e), is entitled to be
relieved of tax liability.
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