- 4 -
A simple arithmetical calculation reveals that respondent
computed petitioners' tax deficiency by applying a tax rate of 70
percent, which was the highest tax rate imposed for 1978.5
On July 12, 1982, Lu N. Nevels, Jr., Esq., filed a joint
petition for redetermination (assigned docket No. 17445-82) on
behalf of a large group of taxpayers, including petitioners, who
had received notices of deficiency with Kersting-related
adjustments.6 Disputing the $67,972.50 figure used in the notice
of deficiency, the petition includes an allegation that the
interest deduction reported on petitioners' 1978 income tax
return attributable to their participation in Kersting programs
was only $38,523.7 In addition, the petition includes an
allegation that the notice of deficiency issued to petitioners is
arbitrary and capricious.
On September 13, 1982, respondent filed an answer to the
petition. Specifically, respondent denied for lack of sufficient
information the allegation respecting the specific amount of the
5 Inasmuch as there were no other adjustments in the notice
of deficiency, and assuming that the adjusted gross income that
petitioners reported is correct, respondent erred in computing
petitioners' tax liability for 1978 using a 70-percent tax rate,
which was only applicable with respect to taxable income
exceeding $203,200 for joint filers.
6 Petitioners resided in Woodland Hills, California, at the
time the petition was filed.
7 The petition identifies the payees as Atlas Funding Corp.,
Fargo Acceptance Corp., Federated Finance Co., Forbes Acceptance
Corp., and Mahalo Acceptance Corp.
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