Paul Trans and Thuy Bich Dang - Page 3




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               (4) whether petitioners are entitled to certain Schedule C             
          deductions for tax year 1994; and                                           
               (5) whether petitioners are liable for accuracy-related                
          penalties for negligence pursuant to section 6662(a), for all               
          years at issue.                                                             
               Some of the facts have been stipulated and are herein                  
          incorporated by this reference.  When they filed their petition,            
          petitioners were married and resided in Milpitas, California.               
               For purposes of order and clarity, each of the issues                  
          submitted for our consideration is set forth below with separate            
          background and discussion.                                                  
                                The Danville Property                                 
          Background                                                                  
               On September 29, 1989, petitioners purchased their primary             
          residence on Creekpoint Court in Danville, California.  On April            
          30, 1992, petitioners executed a grant deed dated April 29, 1992,           
          conveying the property to Mamoona P. Haq (Haq) for a purchase               
          price of $400,000.  On June 17, 1992, the grant deed was recorded           
          in Contra Costa County, California.                                         
               By a document captioned “Deed of Trust with Assignments of             
          Rents”, dated May 15, 1992, and signed by Haq on May 18, 1992,              
          Haq assigned to petitioners, for consideration of $24,359.30, all           
          rents, issues and profits with respect to the Danville property.            
          A document captioned “Assignment of Deed of Trust and Request for           
          Special Notice”, also dated May 15, 1992, and bearing                       
          petitioners’ signatures, represents that petitioners were thereby           

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