Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 13

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          INCOME (WHIPSAW)” and stated that “We have adjusted your gross              
          income to include amounts received for grain income for                     
          $751,988.00 in 1994.”  No further explanation was provided.                 
          Respondent also determined that Russell and Clarice were liable             
          for the accuracy-related penalties pursuant to section 6662(a)              
          for 1994 and 1995 with respect to certain adjustments contained             
          in the notice of deficiency.  These adjustments included the                
          increase in gross income for grain income, issues subsequently              
          conceded by Russell and Clarice relating to oil and gas                     
          activities, and an issue subsequently conceded by respondent                
          relating to certain royalty income.                                         
               In their petition, Russell and Clarice alleged that                    
          respondent “erroneously included within the taxpayers’ gross                
          income grain income in the amount of $751,988 for the tax year              
          1994".  In his answer, respondent denied this allegation but did            
          not elaborate on the reason for the inclusion of the additional             
          amount in gross income.                                                     
               The primary issue in this case involves the proper                     
          allocation between the estate and Russell of the grain sales                
          income for 1994.  Respondent has protected the Government from a            
          potential whipsaw by taking inconsistent positions in his notices           
          of deficiency.  Respondent’s primary argument is that the estate            
          and Russell are each liable for income tax on their respective              

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