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III. Issue 8. Interest Income
Section 61(a) provides that gross income means all income
from whatever source derived. Section 61(a)(4) provides that
gross income includes interest.
Respondent contends that petitioners failed to report
interest income of $2,824 on their Federal income tax return.
Information returns provided to respondent show that petitioners
received $17,952 in interest income in 1990. Petitioners
reported only $15,128 as interest income on their 1990 return.
Petitioners contend that $633 of the unreported interest
income paid by Allstate Life Insurance Co. (Allstate) was not
taxable. They submitted a letter from Allstate, which they claim
explained that the interest was not taxable. The letter does not
support their contention.
Petitioners have offered no evidence as to the remaining
amount of unreported interest income determined by respondent.
However, respondent presented testimony and documentary evidence
showing that petitioners received $2,824 in interest income which
was not reported on their 1990 return. Therefore, respondent is
sustained on this issue.
IV. Issue 9. Claimed Deductions for Self-Employment Taxes
Section 275(a)(1) provides that no deduction shall be
allowed for Federal income taxes. However, section 275 does not
apply to disallow a deduction for taxes to the extent such a
deduction is allowable under section 164(f), which provides that
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