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respondent asserted further adjustments to petitioners' 1990
joint return, including: (1) An increase of $195,101 in the
deficiency in income tax set forth in the original notice; and
(2) an addition to tax of $373,731 under the civil fraud penalty
of section 6663 or, alternatively, an increased penalty pursuant
to section 6662(a) of $99,662.1
After concessions, two issues remain regarding petitioners'
income tax liability for 1990: (1) Whether petitioners are
liable for the penalty pursuant to section 6663 for failure to
report $990,000 of income with the intent of evading the payment
of Federal income tax. We hold they are. (2) Whether section
163(h)(3) limits petitioners' Schedule A deduction for home
mortgage interest to interest paid on acquisition debt of $1
million. We hold it does.
FINDINGS OF FACT
The parties have stipulated to some of the facts and the
Court has so found. The stipulation of facts and accompanying
exhibits are incorporated herein. Peter S. Pau (petitioner) and
Susanna H. Pau (Susanna) were married and resided in
Hillsborough, California, at the time they filed their petition
in this case.
1 All section references are to the Internal Revenue Code
in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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