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from the $1,677 amount. Instead, respondent subtracted only
$1,084 from the $1,677 amount.
Moreover, respondent's computation is flawed with respect to
an additional item of dividend income. In Wilson I, we found
that petitioners received a $2,105 dividend distribution from a
stock fund, which they failed to report on their 1989 income tax
return. Accordingly, respondent's Rule 155 computation should
have made an adjustment to increase petitioners' dividend income
by this amount. Thus, petitioners' unreported dividend income
for 1989 is $1,001 ($2,105 minus $1,104). However, rather than
increasing petitioners' dividend income by $2,105, respondent's
Rule 155 computation decreases petitioners' determined capital
gain income of $29,904 by $27,800, thus leaving petitioners with
a capital gain of $2,104.4 Given this scenario, we find that
respondent's Rule 155 computation erroneously characterizes the
$2,105 distribution as capital gain, rather than as ordinary
dividend income.
IV. Capital Loss
In 1989, petitioners sold their stock fund for $27,206.
Petitioners failed to report this transaction on their 1989
return. In the notice of deficiency for 1989, respondent
4 We note that the $1 difference between the $2,105 dividend
distribution petitioner's failed to report and the $2,104 capital
gain reflected in respondent's Rule 155 computation results from
the fact that we rounded the $2,105 amount up from $2,104.66.
See supra note 1.
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