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in connection with their construction and attempted sale of the
Acapulco house (the real estate activity).4
In April 1994, the Internal Revenue Service (IRS) assigned
petitioners' refund claim to Office Auditor Monte Kruse (Mr.
Kruse). On or about May 20, 1994, Mr. Kruse proposed a partial
disallowance of the refund claim. On or about June 23, 1994, Mr.
Kruse sent petitioners a Letter 905 (Formal Notice of Partial
Claim Disallowance) which allowed $10,801 of the refund claim.
Petitioners protested the proposed partial disallowance, and on
June 30, 1994, the case was referred to the Appeals Office.
On July 5, 1994, $10,801 of the tax was abated. On or about
July 25, 1994, the examination division notified petitioners that
$10,801 would be refunded.
3(...continued)
Item Amount
Advertising $1,719.83
Commissions and Fees 125.00
Repairs and Maintenance 85.00
Supplies 4,405.99
Utilities 921.08
Mortgage Interest 49,860.47
Total 57,117.37
Petitioners concede any difference between the new or increased
amounts and the amounts respondent concedes.
4 We use the term "real estate activity" for convenience
only.
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