Robert C. and Carol S. Jacobsen - Page 3

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          year in issue, and all Rule references are to the Tax Court Rules           
          of Practice and Procedure.                                                  
               Respondent determined a deficiency of $15,195 in                       
          petitioners’ Federal income taxes for 1997.  The deficiency                 
          resulted from disallowance of deductions for car and truck                  
          expenses, legal and professional expenses, and salaries and wages           
          claimed on Schedule C, Profit or Loss From Business, attached to            
          petitioners’ Federal income tax return.  Respondent made                    
          adjustments to petitioners’ Schedule A, Itemized Deductions, and            
          determined that petitioners were liable for a 10-percent                    
          additional tax on each petitioner’s distribution from a                     
          retirement plan.  After concessions, the issues remaining for               
          decision are whether petitioners have adequately substantiated              
          expenses subject to section 274(d) or for legal and professional            
          fees claimed and whether the additional tax imposed on early                
          distributions under section 72(t) applies to the distributions              
          received from their retirement plans.                                       
               Petitioner Robert C. Jacobsen (Mr. Jacobsen) was licensed to           
          sell real estate in Arizona and New Jersey prior to and during              
          1997.  Petitioner Carol S. Jacobsen (Mrs. Jacobsen) was employed            
          prior to 1995 as an executive secretary.  In 1995, Mrs. Jacobsen            
          was diagnosed with a heart condition, and a heart transplant was            
          recommended.  Mrs. Jacobsen had to give up her regular employment           

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