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Whether a punitive damage award of $200,000 that petitioners
received in 1993 is includable in their gross income. We hold it
is.2 (2) Whether petitioners are entitled to deduct interest on
a consumer loan in an amount greater than that allowed by
respondent. We hold they are not.
All section references are to the Internal Revenue Code in
effect for the taxable year in issue, and all Rule references are
to the Tax Court Rules of Practice and Procedure, unless
otherwise indicated. References to petitioner are to David
1(...continued)
Car Cleaning, had gross receipts of $1,842 in 1993.
Petitioners concede that the $48,440 of interest they
received in 1993 pursuant to a judgment order is includable in
their gross income.
In the notice of deficiency, respondent determined that
petitioners were not entitled to claim deductions of $1,011 for
vehicle expenses and $322 for utility expenses, because of lack
of substantiation and because petitioners did not establish an
ordinary and necessary business purpose for the expenditures.
As we read the petition in this case, we do not construe it
as containing any reference to respondent's determinations
disallowing petitioners' vehicle and utility expense deductions.
See Rule 34(b)(4). Furthermore, petitioners did not address
these determinations at trial or on brief and did not proffer any
evidence to substantiate these claimed deductions. Accordingly,
we consider petitioners to have conceded these amounts.
2Respondent determined that for the year at issue certain
computational adjustments should be made, which would: (1)
Reduce petitioners' deduction for exemptions, (2) reduce
petitioners' itemized deductions, and (3) preclude petitioners
from claiming the earned income credit.
In their petition, petitioners raised the issue of whether
the punitive damage award is includable in their gross income
and, on the basis of that issue, disputed respondent's
computational adjustments. Our decision of the punitive damage
award issue will resolve the dispute of respondent's
computational adjustments.
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