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the note payable and $220,468 for the note assumed by the
corporation for petitioner's liability to his ex-wife.
Respondent also denied $13,885 in business expenses for 1991
and determined petitioners received constructive dividend income
in the amounts of $28,197 for 1991 and $13,651 for 1992. In
addition, their taxable income was increased in the amounts of
$32,976 and $1,547 for 1991 and 1992, respectively, pursuant to
the passive activity loss limitation provisions of section 469.
For taxable years 1992 and 1993, respondent characterized
petitioners' reported self-employment income as wage income and
disallowed deductions of $10,000 and $9,500, respectively, for
their contribution to a Simplified Employee Pension/Keogh Plan.
Petitioners filed a petition with the Court, alleging error
in each determination contained in the notice of deficiency.
Respondent filed an answer denying each allegation contained in
the petition.
Respondent subsequently filed an amendment to answer
asserting that the insurance premium renewals transferred to the
corporation had a basis of zero, not $245,000 as stated by
petitioners in their 1991 tax return. The amendment to answer
also asserted that there was a deficiency attributable to gain
resulting from the difference between the $220,468 liability
assumed by the corporation and the adjusted basis of all the
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