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Respondent determined deficiencies in petitioners’ 1995 and
1996 Federal income taxes of $5,940 and $5,354, respectively.
Respondent also determined that petitioners are liable for
negligence penalties under section 6662(a) for 1995 and 1996 of
$1,188 and $1,070.80, respectively.
The issues are whether petitioners are (1) entitled to
deduct losses on Schedule C, Profit or Loss From Business, for
the years in issue arising from a used-car activity of petitioner
Claude D. Mayo, Sr. (petitioner); (2) entitled to deduct greater
medical and mortgage interest expenses than the amounts allowed
by respondent; and (3) liable for the negligence penalties under
section 6662(a) for 1995 and 1996. At the time the petition was
filed petitioners resided in Moneta, Virginia.
The relevant facts may be summarized as follows. During
1995 and 1996 petitioners reported income from interest,
dividends, pensions, and wages of $61,929 and $60,589,2
respectively. Petitioners deducted losses of $24,554 in 1995 and
$24,729 in 1996 from the used-car activity (Mayo’s Auto Sales).
Petitioners’ Schedule C for the years in issue showed the
following:
2 The 1996 income also includes gambling income and capital
gains.
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Last modified: May 25, 2011