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entirety and, in lieu thereof, allowed petitioner the standard
deduction for that year. Thus, following respondent's
adjustments for 1992, petitioner did not realize any tax benefit
in 1992 from the deduction of State income taxes, and,
consequently, petitioner would not be required to include any of
her 1992 State income tax refund in her 1993 income.5 Rather
than including an additional amount in petitioner's 1993 income,
respondent should have reduced petitioner's 1993 income by $729,
the amount of State income tax refund that petitioner reported as
taxable income on her 1993 return.
Consequently, if the Court sustains respondent's
determination that BRVC was an activity not engaged in for profit
in 1992, thus upholding the disallowance of itemized deductions
for that year, petitioner would not be required to include any
State income tax refund in her 1993 income.6 Thus, if respondent
is sustained on the primary issue in this case, a computation
5 It is notable that, even if there had been an increase
in 1992 itemized deductions (which did not happen in this case),
respondent should have included no more than $498 in petitioner's
1993 income ($1,227 - $729 = $498) because petitioner had
reported $729 on her 1993 return.
6 On the other hand, if petitioner prevails on the issue
of whether BRVC was an activity not engaged in for profit, this
adjustment would be remedied as a result thereof because
respondent characterizes it as a computational adjustment flowing
from the determination that BRVC was an activity not engaged in
for profit.
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