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1989. Respondent determined deficiencies of $11,253, $15,996,
and $14,689 for the respective years. Respondent also determined
that petitioners were liable for an $8,440 addition to their 1987
tax under section 6653(b)(1)(A), an $11,997 addition to their
1988 tax under section 6653(b)(1), and an $11,017 penalty for
fraud as to 1989. Respondent also determined that petitioners
were liable for a time-sensitive addition to their 1987 tax under
section 6653(b)(1)(B).
We must decide whether petitioners are liable for the
deficiencies, additions to tax, and penalty. We hold they are
liable for the deficiencies to the extent stated herein and that
they are not liable for any of the additions to tax or the
penalty. Unless otherwise indicated, section references are to
the Internal Revenue Code applicable to the relevant years. Rule
references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some facts have been stipulated. We incorporate herein by
this reference the parties’ stipulation of facts and the exhibits
submitted therewith. We find the stipulated facts accordingly.
Petitioners resided in Charlevoix, Michigan (Charlevoix), when
their petition was filed. They filed joint 1987, 1988, and 1989
Federal income tax returns.
Michael Barnard (Mr. Barnard) grew up in East Jordan,
Michigan. Upon graduating from high school, he attended the
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