John Charles Treadaway, Sr. - Page 17




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          as capital gain for that year.                                              
               With respect to the net operating loss deductions claimed in           
          the 1994 and 1995 joint returns, on the record before us, we find           
          that petitioner has failed to show entitlement to those deduc-              
          tions.  Accordingly, we sustain respondent’s determinations to              
          disallow those claimed deductions for the years at issue.                   
               With respect to the respective Social Security benefits that           
          Ms. Treadaway and petitioner received during 1994 and 1995, none            
          of which was included in taxable income in the joint returns for            
          those years, on the record before us, we sustain respondent’s               
          determinations to include in taxable income for the years at                
          issue 85 percent of the respective Social Security benefits that            
          Ms. Treadaway and petitioner received during those years.  See              
          sec. 86(a)(2)(B).                                                           
               With respect to the accuracy-related penalty under section             
          6662(a) that respondent determined for each of the years at                 
          issue, respondent concedes on brief that that penalty should not            
          be imposed on the portion of the underpayment for each of those             
          years that is attributable to the failure to include in taxable             
          income for each such year 85 percent of the respective Social               
          Security benefits that Ms. Treadaway and petitioner received                
          during each such year.  In addition, we have held that petitioner           
          is entitled for 1995 to deduct from the income reported in                  
          Schedule F of the 1995 joint return $10,101.37 of expenses that             






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