James W. Harris and Dorthy R. Harris - Page 3

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          the relevant period; among other things, they were unable to pay            
          their obligations timely, and they lost property in foreclosure.            
               Petitioners filed a 1992 joint Federal income tax return on            
          April 19, 1995, reporting the following items of income:                    
                    Wages                                                             
                    $66,451                                                           
                    Taxable interest income                                           
                    2,015                                                             
                    Business income or (loss)                                         
                    (73,129)                                                          
                    Unemployment compensation                                         
                    4,664                                                             
                    Other income--Jury duty                                           
                    37                                                                
          Petitioners claimed that their taxable income was zero and that             
          their tax liability was zero.  Petitioners claimed they were due            
          a refund of $4,504, which represented the amount of Federal                 
          income tax that was withheld from wages paid to Ms. Harris.                 
               Petitioners reported the $2,015 of interest income to                  
          reflect their receipt of $1,832 in Alaskan permanent fund                   
          dividends.  Petitioners erroneously reported the $2,015 amount,             
          rather than the correct $1,832 amount, and they erroneously                 
          reported that the dividends were interest.  The parties agree               
          that petitioners should have reported the $1,832 amount as                  
          miscellaneous income.                                                       
               Petitioners received 1992 Forms 1099-INT, Interest Income,             
          in the amounts and from the payers set forth below:                         
               National Bank of Alaska (NBA)    $11,880                               
               Alaskan Federal Credit Union          28                               
               Internal Revenue Service              76                               





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