David C. Jonson and Estate of Barbara J. Jonson, Deceased - Page 6

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          Respondent’s Adjustments                                                    
               Respondent’s adjustments giving rise to the deficiencies               
          here in question (sometimes, the deficiencies) result from                  
          respondent’s disallowances of the Vulcan losses and a small                 
          credit (without distinction, the Vulcan losses) claimed on the              
          joint returns.  In the notice, respondent explains the                      
          disallowances as follows:                                                   
               It is determined that you incurred no deductible loss                  
               for the taxable years 1981 and 1982 from the Vulcan Oil                
               Technology a partnership in which you own an interest.                 
               It has not been established that the partnership                       
               incurred any loss for the taxable years 1981 and 1982,                 
               nor has it been established that if the partnership did                
               have a loss for the taxable years 1981 and 1982, that                  
               you are entitled to deduct any portion of that loss on                 
               your income tax return.  Accordingly, your taxable                     
               income for the years 1981 and 1982 is increased by                     
               $75,620.00 and $71,078.00.                                             
               After the initiation of this action, and following                     
          respondent’s prevailing in certain test cases involving                     
          investments similar to Vulcan (the test cases),5 petitioners                
          conceded the deficiencies.                                                  
          The Jonsons                                                                 
               Barbara was born on March 21, 1930.  She received an                   
          associate’s degree from Colorado Women’s College in 1949, a                 

               5  On brief, petitioners identify those cases as follows:              
          Krause v. Commissioner, 99 T.C. 132 (1992), affd. sub nom.                  
          Hildebrand v. Commissioner, 28 F.3d 1024 (10th Cir. 1994); and              
          Acierno v. Commissioner, T.C. Memo. 1997-441, affd. 185 F.3d 861            
          (3d Cir. 1999).                                                             

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