Newton K. and Kimberly A. McKoin - Page 3




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          overpayment in the amount of $4,543.                                        
               In processing petitioner’s 1997 return, respondent                     
          discovered mathematical or clerical errors that served to                   
          understate petitioner’s reported tax liability, and therefore               
          overstate petitioner’s overpayment claim, by $118.  After                   
          correction of these errors, the overpayment claim was reduced to            
          $4,425.                                                                     
               By notice dated June 1, 1998, respondent advised petitioner            
          that the overpayment claimed on his 1997 return (corrected as               
          described above) had been applied to petitioner’s outstanding tax           
          liability for 1987.                                                         
               On February 4, 2000, respondent sent petitioner a notice of            
          deficiency determining a deficiency in his Federal income tax for           
          1997 in the amount of $1,950.  The deficiency was based on                  
          respondent’s determination that petitioner had failed to report             
          on his 1997 return: (1) Gambling income in the amount of $6,800,            
          (2) interest income in the amount of $315, and (3) taxable Social           
          Security benefits in the amount of $5,878.                                  
               Shortly after respondent sent the notice of deficiency,                
          petitioner submitted Form 1040X, Amended U.S. Individual Income             
          Tax Return, for 1997.  In the Form 1040X, petitioner admitted               
          that he had failed to report the amounts determined by respondent           
          in the notice of deficiency and that his total income tax                   
          liability for 1997 was $4,451, an amount consistent with                    






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