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portion of that tax. Petitioner’s liability is
decided in the body of the opinion; the deduction
is computational.
6. Respondent concedes petitioners may be entitled to
deduct a larger amount for charitable
contributions for the taxable year, as and to the
extent shown in the Rule 155 computation.
7. Respondent determined petitioners were liable for
the fraud penalty pursuant to sec. 6663 on the
portion of the underpayment attributable to the
constructive dividends and the income from self
employment. Respondent concedes that Mrs. Cordes
is not liable for that penalty.
B. 1995:
1. The parties stipulated that for 1995, the
following distributions constitute constructive
dividends from ECI: $16,000 from diversion of
checks from unidentified loans; $55,088 from
diversion of tag refunds; and $28,514 from excess
payoffs.
2. The parties stipulated that for 1995, $45,702 from
an unexplained source of funds constitutes a
constructive dividend from CFC. Respondent
concedes that portion of his determination in
excess of the parties’ stipulation.
3. Petitioners concede receiving $14,462 in Social
Security benefits in 1995. The extent to which
they are taxable will be calculated in the Rule
155 computation.
4. Respondent made various computational changes to
petitioners’ taxable income because the increase
in constructive dividends increased petitioners’
taxable income so that the limitation of itemized
deductions was increased, itemized deductions were
eliminated, the standard deduction was allowed,
and the exemption amount under sec. 151(d)(3) was
reduced. The extent to which these changes affect
petitioners’ ultimate liability will be calculated
in the Rule 155 computation.
5. Respondent determined petitioner had self-
employment income, that petitioner was liable for
the self-employment tax on that income, and that
petitioner was entitled to a deduction for a
portion of that tax. Petitioner’s liability is
decided in the body of the opinion; the deduction
is computational.
6. Respondent concedes petitioners may be entitled to
deduct a larger amount for charitable
contributions for the taxable year, as and to the
extent shown in the Rule 155 computation.
7. Respondent determined petitioners were liable for
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