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dated September 3, 1996, Ms. Wynne attempted to explain that
petitioners did not receive special treatment from Mr. McWade in
the settlement of their case as follows:
As we discussed on the telephone, I have received
authorization from Mr. and Mrs. Richards to disclose
the attached copy of the computer transcript of the
Richards' account for 1978. As you are aware, neither
the government nor the Richards has a copy of the
Richards' 1978 return. But the information on the
enclosed transcript reflects the following information
concerning the 1978 return filed by the Richards.
The 1978 tax return was filed June 25, 1979, and
showed an income tax liability of $3,495. Advance or
estimated payments of $8,931 were credited to the
account on April 15, 1979. On June 25, 1979, a refund
of $5,489.09 was generated to the Richards (along with
interest of $53.09). On December 31, 1986, the
Richards's account was credited with a tax payment of
$23,000 and interest of $30,571. The tax of $23,000
and interest of $30,571 were assessed on October 5,
1987 (which date was within 60 days of the date the Tax
Court decision became final).
In addition to showing the above information, the
enclosed transcript also shows that the Richards's
reported adjusted gross income of $86,574 on their 1978
return, and taxable income of $11,975. The maximum tax
rate in 1978 was 70 percent, but that rate did not
apply until taxable income reached $203,200 for joint
filers. Accordingly, even without allowance of the
Kersting related deductions, the Richards's taxable
income in 1978 was not high enough to trigger the
maximum tax rate of 70 percent that was used in the
notice of deficiency. Thus, any comparison of the
amount asserted in the notice with the amount on
decision must be made after adjusting for the proper
tax rate.
As the Court noted during the hearing, the
petition filed on behalf of the Richards alleged that
Kersting related deductions were only $38,523.
Assuming the petition is correct, the tax on taxable
income of $50,498 ($11,975 per the return and $38,523
disallowed Kersting deductions) is $15,709, which
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