Marvin L. Barmes and Barbara J. Barmes - Page 2




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                  2.    Whether petitioners may deduct as a casualty loss for                          
            1994 the cost of improving and restoring their pond and its                                
            surrounding grounds.  We hold that they may not.                                           
                  3.    Whether petitioners are liable for the accuracy-related                        
            penalty under section 6662(a) for 1994.  We hold that they are.                            
                  The parties agree that, to the extent that we sustain                                
            respondent’s determinations increasing petitioners’ income shown                           
            on Schedule C, Profit or Loss From Business, a computational                               
            adjustment is required for petitioners’ self-employment tax for                            
            1994.                                                                                      
                  Unless otherwise indicated, section references are to the                            
            Internal Revenue Code.  References to petitioner are to Marvin L.                          
            Barmes.  References to Mrs. Barmes are to petitioner Barbara J.                            
            Barmes.                                                                                    
                                         FINDINGS OF FACT                                              
                  Some of the facts have been stipulated and are so found.                             
            A.    Petitioners                                                                          
                  Petitioners lived in Fritchton, Indiana (the Fritchton                               
            residence), when they filed their petition.  The Fritchton                                 
            residence is located on 17.73 acres of land (the Fritchton                                 
            property).  Petitioners acquired the Fritchton residence and                               
            property in 1978.                                                                          
                  There is an old farmhouse located near petitioners’                                  
            residence on the Fritchton property.  Mrs. Barmes’ mother lived                            






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