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Petitioners were delinquent in paying their Federal income
taxes for 1984, 1985, 1986, 1987, and 1993. During the taxable
year 1995, petitioners paid $228,180.67 in statutory interest
under section 6601(a) on the aforementioned delinquent Federal
income tax liabilities.
On April 15, 1996, petitioners filed with the Internal
Revenue Service (IRS) Form 4868, Application for Automatic
Extension of Time To File U.S. Individual Income Tax Return. On
August 14, 1996, petitioners filed with the IRS Form 2688,
Application for Additional Extension of Time To File U.S.
Individual Income Tax Return. The original due date of
petitioners' 1995 tax return was April 15, 1996, and with
extensions the due date was October 15, 1996. On June 16, 1997,
petitioners filed their joint 1995 Federal income tax return.
Petitioners claimed deductions on their 1995 and 1996 tax
returns for a portion of the $228,180.67 of statutory interest
that they paid on their delinquent taxes during 1995. In
particular, for 1995, petitioners reported $166,358 as an expense
on Schedule C, Profit or Loss From Business, and $41,589 as an
investment interest expense on Form 4952, Investment Interest
Expense Deduction. Of the $41,589 reported on Form 4952,
petitioners claimed a deduction of $18,674 on Schedule A,
Itemized Deductions, of their 1995 return and carried over the
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