Howard L. Burris, Sr. and Barbara J. Burris - Page 6




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               Respondent issued a notice of deficiency on April 1, 1999.             
          The notice5 (1) disallowed some of the deductions claimed on                
          Schedule C; (2) determined that petitioner failed to report                 
          dividend and interest income of $95 in 1990, $5,493 in 1991, and            
          $253 in 1993; and (3) made adjustments to petitioners’ itemized             
          deductions on Schedule A.  As to the itemized deductions on                 
          Schedule A, the notice of deficiency indicated the following:               
                    It is determined that interest expense deduction of               
               $76,098.00, $84,638.00 and $67,297.00 respectively for the             
               taxable years ended December 31, 1990, 1991 and 1993 is                
               allowable instead of $86,128.00, $100,865.00 and $58,292.00            
               respectively as shown on your tax returns for the taxable              
               years ended December 31, 1990, 1991 and 1993.  Accordingly,            
               your taxable income is increased $10,030.00 and $16,227.00             
               for the taxable years ended December 31, 1990 and 1991, and            
               your taxable income is decreased $9,005.00 for the taxable             
               year ended December 31, 1993.[6]  [Emphasis added.]                    
                                                                                     
          Respondent also determined that petitioner was liable for the               
          accuracy-related penalty pursuant to section 6662(a).                       
               Respondent served petitioners with interrogatories and a               
          request for production of documents on January 27, 2000.                    
          Petitioners failed to respond to the formal discovery, and                  
          respondent filed motions to compel responses to interrogatories             


               5    Although the explanation in the notice of deficiency              
          appears to disallow the claimed investment credit, the notice               
          does not contain an adjustment to this item.                                
               6    The decrease in income for 1993 is due to a                       
          carryforward of disallowed interest under sec. 163(d) from 1991.            
          The carryforward amount will be affected by our holding with                
          respect to 1991 and can be accounted for in the Rule 155                    
          computation.                                                                





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