Kern S. and Soledad D. Smith - Page 2

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          Court Rules of Practice and Procedure, unless otherwise                     
          indicated.                                                                  
               After a concession,1 the issues for decision are as follows:           
               (1) Whether petitioners are entitled to previously unclaimed           
          Schedule C deductions in excess of the amount conceded by                   
          respondent.  We find they are not.                                          
               (2) Whether petitioners are liable for an addition to tax              
          pursuant to section 6651 for late filing.  We hold they are.                
               (3) Whether petitioners are liable for a penalty pursuant to           
          section 6662 for negligence.  We hold they are.                             
               Certain automatic adjustments will be required in the                  
          calculation of self-employment tax and related items of a                   
          computational nature flowing from our findings.                             
               Some of the facts have been stipulated and are so found.               
          The stipulated facts and accompanying exhibits are incorporated             
          into our findings by this reference.  When they filed their                 
          petition herein, petitioners resided in Oakland, California.                
               Petitioners filed their individual Federal income tax return           
          for 1993 on October 13, 1995.  The return was due on April 15,              
          1994.  Petitioners had neither sought nor been granted an                   
          extension of time in which to file.                                         


               1  Petitioners conceded that Mr. Kern Smith (petitioner)               
          received $183,585 as self-employment income which petitioners               
          failed to report.  Respondent conceded petitioners are entitled             
          to deduct $114,394 in previously unclaimed deductions.                      




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