2
After concessions,1 the issues for decision are:
(1) Whether petitioners' taxable income from International
Best Buys was $23,574 in 1990 and $147,426 in 1991, as
petitioners contend; $131,508 in 1990 and $396,905 in 1991, as
respondent contends; or some other amount. We hold that
petitioners' income from International Best Buys was $64,910 in
1990 and $201,992 in 1991.
(2) Whether petitioners may carry back net operating losses
of $15,976 to 1987 and $15,491 to 1988. We hold that they may
not.
(3) Whether petitioners are liable for (a) additions to tax
for negligence under section 6653 for 1987 and 1988 and
substantial understatement of income tax under section 6661 for
1987; and (b) the accuracy-related penalty under section 6662(a)
for 1990 and 1991. We hold that they are.
1 Petitioners concede that they failed to report the
following income:
1990 1991
IBM tax payments for Mr. Paula $44,069 $51,271
IBM severance payment to Mr. Paula -- 36,808
Wages paid to Mrs. Paula by A&P 1,609 --
Interest 2,542 943
Respondent concedes that petitioners are entitled to a
foreign tax credit of $7,510.83 for 1991 relating to the IBM
severance payment to Mr. Paula. Respondent also concedes that
petitioners may deduct a $141 penalty they paid in 1990 as the
result of a premature withdrawal of funds from a certificate of
deposit.
The Court expects the parties to compute petitioners' self-
employment tax liability and personal exemption phase-out (if
applicable) under Rule 155.
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