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signatory authority, and they received nonemployee compensation
of $2,319 from a State bank (Bank). Ms. Lobe received during
that year $1,544 in wages. Mr. Lobe received during 1996 $700 in
nonemployee compensation from the CU.
During 1995 and 1996, petitioners conducted a business known
as Jim Lobe Construction (JLC). They reported to the State of
Washington that JLC’s gross receipts in the respective years were
$128,464 and $85,184. They have not provided to respondent or to
the Court any documentation to substantiate any costs of goods
sold or business expenses which they may have incurred during
those years in JLC’s operation. Nor have they provided any
documentation to substantiate their entitlement to any other
deduction for those years.
Respondent determined that Mr. Lobe had failed to report
taxable income of $122,251 and $74,946 during the respective
years. Respondent determined this income as follows, noting that
because Washington is a community property State, respondent was
treating Mr. Lobe as realizing all of his income and 50 percent
of Ms. Lobe’s income:1
1 Respondent concedes on brief that each spouse should be
taxed on only 50 percent of the income that he or she earned and
that a computation under Rule 155 will be necessary to effect
this result. Respondent determined in the notices of deficiency
as a protective measure that each spouse was taxable on 100
percent of the income that he or she earned.
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Last modified: May 25, 2011