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Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
After concessions, the issues for decision are: (1) Whether
petitioners had unreported income from Latin Investment
Corporation in 1988; (2) whether petitioners had unreported
income from L&L Construction Company in 1988; (3) whether
petitioners are entitled to home mortgage and personal interest
deductions for 1988 and 1989 in an amount greater than allowed by
respondent; (4) whether petitioners are entitled to certain
business deductions claimed on their Schedule C for 1988;
(5) whether petitioners are liable for increased self-employment
tax in 1988; (6) whether petitioners are liable for the addition
to tax and penalty for negligence for 1988 and 1989,
respectively; and (7) whether petitioners are liable for the
substantial understatement addition to tax for 1988.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference. At the
time the petition was filed, petitioners resided in Vienna,
Virginia.
Fernando Leonzo (petitioner) was president and an owner of
the Latin Investment Corporation (LIC). Petitioner received a
salary from LIC. In 1988, petitioner was involved with starting
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