Tina & Sheafen Kuo - Page 7




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               The third issue for decision is whether petitioners received           
          but did not report dividend income.  Respondent determined that             
          petitioners failed to report $772 in dividend income from Charles           
          Schwab.2                                                                    
               Gross income generally includes income from whatever source            
          derived, including dividends.  See sec. 61(a)(7); sec. 301(c)(1).           
          Petitioners do not deny receiving the $772 of dividend income               
          from Charles Schwab.  Rather, Mr. Kuo testified that the dividend           
          income was reported on the Schedule C as gross receipts (the                
          remainder of the reported $1,720 in gross receipts was                      
          purportedly a mistake and not income).  We find this testimony to           
          be incredible; we do not believe that petitioners reported                  
          dividend income as the sole income from their computer-related              
          business, and that in the process they somehow mistakenly entered           
          $1,720 instead of $772.  We uphold respondent’s determination               
          that petitioners received $772 in unreported income.                        
               The final issue for decision is whether petitioners are                
          liable for an accuracy-related penalty under section 6662(a).               
          Respondent determined that petitioners are liable for an                    
          accuracy-related penalty imposed by section 6662(a) for the                 
          portion of the underpayment of tax for 1996 attributable to                 


          2Respondent concedes the following amounts reflected in the                 
          notice of deficiency as unreported income:  $221 of dividends and           
          $3 of interest from Herzog Geduld, and $200 of dividends and $1             
          of interest from E Trade Securities.  Petitioners concede                   
          receiving unreported interest income of $33 from Summit Bank.               





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