Jack and Janet Freeman - Page 8




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                  It is determined that you received an award in                      
                  the amount of $314,174.00 from Thrifty which                        
                  was not reported on your return for the taxable                     
                  year ended December 31, 1994.  This amount is                       
                  determined to be taxable to you because you                         
                  have failed to establish that this amount is                        
                  excludable from gross income under the provi-                       
                  sions of the Internal Revenue Code.  Accordingly,                   
                  income is increased in the amount of $314,174.00.                   

                  Respondent also adjusted the miscellaneous itemized                 
             deductions claimed on Schedule A of petitioners' return,                 
             $610, by adding $194,595 to arrive at total miscellaneous                
             itemized deductions of $195,205, before taking into account              
             the 2-percent floor as required by section 67(a).  It                    
             appears that the additional miscellaneous itemized                       
             deductions allowed in the notice of deficiency relate to                 
             the attorney's fees that petitioner paid with respect to                 
             his suit against Thrifty, but the record does not readily                
             disclose how respondent computed the amount of the                       
             adjustment.  The parties agree that that amount is not                   
             correct and the correct amount of the additional                         
             miscellaneous itemized deductions is $129,698.70, computed               
             as follows:                                                              














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