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1992 62,976 12,595
Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
The issues for decision are as follows:
1. Whether petitioners are liable for the deficiencies
determined by respondent. We hold that petitioners are liable.
2. Whether petitioners, pursuant to section 6662(a), are
liable for accuracy-related penalties. We hold that petitioners
are liable.
3. Whether a penalty, pursuant to section 6673, should be
imposed upon petitioners. We do not impose a penalty.
At the time the petition was filed, petitioners resided in
Chapel Hill, North Carolina.
Petitioners filed, in a timely manner, joint Federal income
tax returns for 1991 and 1992. On the returns, petitioners
reported, among other items, the following: (1) A depreciation
deduction of $2,200 for 1991; (2) a capital loss of $5,056 for
1991; and (3) bad debt deductions of $36,000 for 1991 and
$224,963 for 1992. Respondent disallowed these items and
increased petitioners' taxable income by $41,056 for 1991 and
$224,963 for 1992. Respondent further determined that
petitioners were subject to accuracy-related penalties for
negligence. Petitioners filed their petition on February 12,
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