Bernard J. Penn and Thelma I. Penn - Page 8




                                        - 8 -                                         
          during the year, subject to certain other adjustments not                   
          relevant here.  Sec. 86(b)(2).                                              
               At trial, Mr. Penn admitted that during 1996 petitioners               
          received Social Security benefit payments totaling $8,496.                  
          Petitioners reported adjusted gross income of $24,082.49 for                
          1996, and we have found that petitioners failed to report an                
          additional $28,837 of taxable interest income for that year.                
          Taking into account the $3,517.23 loss on canceled tax                      
          certificates, as conceded by respondent, petitioners’ modified              
          adjusted gross income for 1996 therefore equals $49,402.26.  The            
          sum of petitioners’ modified adjusted gross income plus one-half            
          of their Social Security benefits ($4,248) is $53,650.26.  Since            
          this amount exceeds $44,000, up to 85 percent of petitioners’               
          Social Security benefits is includable in gross income.  We                 
          anticipate that the precise amount of Social Security benefits              
          includable in petitioners’ 1996 gross income will be ascertained            
          by the parties in connection with computations under Rule 155.              
          Issue 3. Accuracy-Related Penalty                                           
               We must also decide whether petitioners are liable for the             
          section 6662(a) accuracy-related penalty.  Respondent determined            
          that petitioners’ entire tax underpayment for the year in issue             
          was the result of a substantial understatement of tax.  Section             
          6662(a) provides for an accuracy-related penalty of 20 percent of           
          any tax underpayment that is attributable to a substantial                  
          understatement of income tax.  Section 6662(d)(1) defines a                 




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011