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Discussion
For 1992, respondent's disallowance of $4,329 in itemized
deductions and corresponding allowance of a standard deduction of
$3,600 are computational adjustments that will be resolved by the
Court's holding on whether BRVC was an activity not engaged in
for profit for that year. Also, for 1993, respondent's
determination of $2,598 in hobby income and allowance of an
additional $914 in itemized deductions3 are computational
adjustments that will be resolved by the Court's holding on
whether BRVC was an activity not engaged in for profit for 1993.
Additionally, for 1993, respondent determined that
petitioner realized income from an unreported State income tax
refund of $1,227. Respondent contends that this adjustment is
computational based on the determination for 1992 that BRVC
constituted an activity not engaged in for profit. The Court
does not agree with respondent's treatment of this item for the
following reasons.
In order for a taxpayer to be required to include a State
income tax refund in income, the taxpayer must have received a
3 Due to the increase in petitioner's adjusted gross
income, petitioner's itemized deductions for medical and dental
expenses were phased out entirely. However, in connection with
BRVC, petitioner was allowed an additional $2,598 in
miscellaneous itemized deductions subject to the 2-percent of
adjusted gross income limitation of section 67(a)(which was also
affected by the increase in adjusted gross income). This
resulted in a $914 net increase in petitioner's 1993 itemized
deductions.
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