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$6,772 of payments for the other three contracts are not
deductible and must be capitalized.
Counsel for petitioners submitted to respondent's counsel
unsworn, and on June 15, 2000, sworn statements from petitioner
and his father as evidence of the June 1994 loan to petitioners.
Petitioners also submitted petitioner's father's Federal income
tax return for 1994. Bank records of petitioner's father from
1994 were unavailable.
As part of the overall settlement, respondent conceded the
unreported income adjustment and the accuracy-related penalty in
June of 2000. On July 21, 2000, the Court filed the parties'
stipulation of settlement in which it is agreed that there is a
deficiency in income tax due from petitioners for 1994 in the
amount of $2,055. Since respondent conceded the unreported
income item, the deficiency necessarily relates to a portion of
the timber contract downpayment adjustment.
Discussion
We apply section 7430 as most recently amended by Congress
in the IRS Restructuring and Reform Act of 1998 (RRA 1998), Pub.
L. 105-206, sec. 3101, 112 Stat. 685, 727. However, the
amendments made by RRA 1998 to section 7430 apply only to costs
incurred or services performed after January 18, 1999. Id. at
729. To the extent the claimed costs were incurred on or before
January 18, 1999, we shall apply section 7430 as amended by the
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