Harold and Barbara Kupersmit - Page 4




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               Petitioners filed petitions with the Court for the 1996 and            
          1997 tax years, and the docketed cases were assigned to an IRS              
          Appeals officer.  On July 19, 1999, petitioners wrote to the                
          Appeals officer and submitted documentation to support their                
          gambling losses.  On July 29, 1999, the Appeals officer wrote to            
          petitioners informing them that she accepted the documentation              
          for gambling losses and would allow the losses as itemized                  
          deductions up to the amount of petitioners’ gambling winnings.              
          She also agreed to waive penalties if petitioners agreed to the             
          gambling adjustments and to the adjustments for their Social                
          Security income for both years.                                             
               Petitioners did not reach a settlement with the Appeals                
          officer, and the 1996 and 1997 cases were transferred to the IRS            
          Chief Counsel’s office in Philadelphia, Pennsylvania, for trial             
          preparation.  The cases were settled by the IRS trial attorney on           
          the same terms as the offer made by the Appeals officer, and                
          decisions were entered on September 23, 1999, for tax year 1996             
          and October 4, 1999, for tax year 1997.  Petitioners are                    
          currently paying their 1996 and 1997 tax liabilities through an             
          installment agreement.  The penalties listed in petitioners’                
          monthly statement from the IRS are failure to pay penalties.                
               Petitioners contend that they are entitled to have their               
          interest abated because the IRS delayed adjusting their 1996 and            
          1997 income tax liabilities. Mr. Kupersmit argued at trial that             






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