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Respondent determined deficiencies of $758, $1,710, and
$3,593 in petitioners' Federal income taxes, respectively, for
1997, 1998, and 1999, an addition to tax under section 6651(a)(1)
in the amount of $86 for 1998, and penalties under section
6662(a) in the amounts of $152, $342, and $719 for 1997, 1998,
and 1999, respectively.
Some of the facts were stipulated, and those facts, with the
annexed exhibits, are so found and are incorporated herein by
reference. At the time the petition was filed, petitioners'
legal residence was Albuquerque, New Mexico.
The issues for decision are: (1) Whether petitioners are
entitled to deductions for expenses incurred in a trade or
business activity during 1999; (2) whether petitioners are liable
for the addition to tax under section 6651(a)(1) for 1998; and
(3) whether petitioners are liable for the accuracy-related
penalties under section 6662(a) for each of the years in
question. In addition, the Court considers the applicability of
section 6673(a) to the facts of this case.
For the 3 years in question, petitioners itemized their
deductions on Schedule A, Itemized Deductions, of their returns.
In the notice of deficiency, respondent disallowed, for each of
the years in question, their itemized deductions for charitable
contributions and miscellaneous deductions, including
unreimbursed employee expenses and tax preparation fees. As a
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