Kevin D. Castro and Margarita C. Castro, et al. - Page 3




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               After concessions,3 the only issues4 for decision are:                 
               1)  Whether the Castro Family Trust (CFT) and the Castro &             
          Co. Jewelers Trust (CCJT) (collectively referred to as the                  
          trusts) should be disregarded for Federal income tax purposes;              
          2)  whether the income and expenses of the jewelry business                 
          allegedly owned by the CCJT and operated by Kevin D. Castro                 
          during the years at issue must be reported by Kevin D. Castro and           
          Margarita C. Castro (collectively referred to as the Castros);              






               3Respondent conceded that, if we hold the trusts are invalid           
          for Federal income tax purposes, the trusts are not liable for              
          the income tax on income properly chargeable to Kevin D. and                
          Margarita C. Castro.  The parties acknowledge that the issue of             
          fiduciary fees will be determined in accordance with our holding            
          regarding the validity of the trusts.                                       
               At trial, the Castro & Co. Jewelers Trust (CCJT) conceded              
          respondent’s adjustment to taxes for 1996.  The CCJT also agreed            
          to concede the adjustment to outside services for 1996 if we hold           
          that the CCJT is valid for Federal income tax purposes.  If,                
          however, we hold that the CCJT is not valid for Federal income              
          tax purposes, then respondent concedes, for 1996, the adjustment            
          to outside services and an increase in depreciation in the amount           
          of $3,800.                                                                  
               Respondent proposed adjustments to the following items in              
          his notices of deficiency, and petitioners are deemed to have               
          conceded these adjustments because, although petitioners disputed           
          them in their petitions, petitioners failed to address them at              
          trial or on brief:  The CCJT’s 1995 charitable contribution(s);             
          the Castro Family Trust’s (CFT) 1995 and 1996 charitable                    
          contributions; and the CFT’s 1995 and 1996 “other deductions” and           
          “miscellaneous itemized deductions”, including medical,                     
          utilities, automobile, meal, travel, and telephone expenses.  See           
          Rule 151(e)(4) and (5); Petzoldt v. Commissioner, 92 T.C. 661,              
          683 (1989); Money v. Commissioner, 89 T.C. 46, 48 (1987).       .           
               4The only other issues are computational.                              




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