Greg McIntosh and Sheila R. McIntosh - Page 16

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          amount of $11,104.67.  The property for which the escrow deposit            
          was made was not identified in a way that was understandable to             
          the examining Internal Revenue agent ("PROPERTY ADDRESS:  AP                
               Appeals later requested on November 17, 1999, identifying              
          information for the purchase and sale of the Vallecito property.            
          The identifying information must therefore have been received               
          sometime after that date, and after the October 26, 1999, filing            
          of respondent's answer in the case.                                         
                    Capitalized Costs From 1994                                       
               During the examination of petitioners' 1994 Federal income             
          tax return, respondent disallowed Schedule C deductions for                 
          automobile expenses, property taxes, and insurance.  Petitioners            
          allege that there was an "informal agreement" to allow them to              
          capitalize a portion of the costs and to allow "deduction" of               
          them in 1996.  The notice of deficiency for 1996 does not reflect           
          such an informal agreement.                                                 
               There is but scant evidence in the record of an informal               
          agreement as alleged by petitioners.  It is not apparent what the           
          terms of such an agreement may have been.  And it was, by                   
          petitioners' own description, an "informal" agreement.  After               
          reviewing documents submitted by petitioners on November 11,                
          1999, Appeals agreed to allow petitioners to capitalize as part             
          of the cost of the Vallecito property a portion of the 1994                 
          expenditures for automobile expenses and property taxes.                    

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