Walter E. Hess and Helen L. Hess - Page 2

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                                       Accuracy-Related Penalty                      
                    Year    Deficiency           6662(a)                              
          1992     $17,970             $3,594                                         
          1993     167,629             33,526                                         
          Following the parties' concessions, we must decide:                         
               1.  Whether section 104(a)(2) excludes from Walter E. Hess's           
          (Mr. Hess) 1993 gross income $425,000 of settlement proceeds he             
          received during that year.  We hold it does not.                            
               2.  Whether Mr. Hess may deduct for 1993 a $170,040                    
          long-term capital loss on his separation from employment with               
          L.G. Balfour Co. (Balfour).  We hold he may not.                            
              3.  Whether Mr. Hess is liable for the accuracy-related                
          penalty determined by respondent under section 6662(a) for 1993.            
          We hold he is.                                                              
               Unless otherwise indicated, section references are to the              
          Internal Revenue Code in effect for the years in issue.  Rule               
          references are to the Tax Court Rules of Practice and Procedure.            
          Dollar amounts are rounded to the nearest dollar.  Although                 
          Helen L. Hess (Mrs. Hess) is a copetitioner, for simplicity and             
          clarity, we refer to Mr. Hess as the sole petitioner.                       
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulations of fact and the exhibits submitted therewith are           
          incorporated herein by this reference.  Petitioner and Mrs. Hess            

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