- 2 -
Accuracy-
Related
Additions to Tax Penalty
Sec.
Sec. 6653(a)(1)/ Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6653(a)(1)(A) 6653(a)(1)(B) 6661 6662(a)
1987 $440,539 --- $22,027 * $110,135 ---
1988 202,360 --- 10,118 --- 50,590 ---
1989 215,930 $7,845 --- --- --- $43,186
* 50 percent of interest due on portion of underpayment
attributable to negligence.
In an Amendment to Answer, respondent increased the
deficiency, addition to tax, and accuracy-related penalty for
1989 to $404,418, $17,269, and $80,883, respectively.
The primary issues for decision are: (1) Whether, during
the years in issue, petitioners' ownership and management of a
timber farm property near Coos Bay, Oregon, constituted a trade
or business activity entered into for profit, as petitioners
contend, or a personal, nonbusiness, not-for-profit activity, as
respondent contends; (2) whether petitioners' investment in
property in Tahiti constituted a for-profit investment under
section 212; (3) the deductibility under section 162 or section
212 of expenses relating to petitioners' use of a Lear jet to
travel, among other places, to their Oregon timber farm property
and to their property in Tahiti; and (4) to what extent expenses
of petitioners' residence in Orange, California, qualify as home
office expenses under section 280A. Various additional and
alternative issues are also for decision (e.g., if petitioners'
timber farm constitutes a for-profit trade or business activity,
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Last modified: May 25, 2011