Craig A. Penfield - Page 4




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          account on a monthly basis.  Petitioner did not report any income           
          from the sales of his small business on his tax return for 1997             
          or any other taxable year.                                                  
               A number of pension withdrawals were made by petitioner and            
          Mrs. Parker.  In 1997, Mrs. Parker made an early pension                    
          withdrawal in the amount of $39,577 from Putnam Investments.                
          (All amounts are rounded.)  An additional pension distribution              
          was also made from another pension fund of Mrs. Parker during               
          1997.  Petitioner also received a pension distribution in 1997              
          from his retirement fund.  Pension distributions totaling $43,783           
          were deposited in the joint money market account during 1997.               
               Petitioner and Mrs. Parker signed and filed a joint Federal            
          income tax return for the taxable year 1997.  The 1997 return was           
          prepared by H&R Block.  On the 1997 return, line 16a, Total                 
          pensions and annuities, was left blank.  Petitioner and Mrs.                
          Parker reported total income of $22,835 on the 1997 return.                 
               Petitioner and Mrs. Parker divorced on June 13, 1999.                  
              In the notice of deficiency for the 1997 taxable year,                 
          respondent determined that petitioner and Mrs. Parker had                   
          unreported interest income in the amount of $884, nonemployee               
          compensation in the amount of $100, royalty income in the amount            
          of $643, and pension income in the amount of $43,783.                       
               Petitioner filed a Form 8857, Request for Innocent Spouse              
          Relief.  Respondent denied petitioner’s request for innocent                






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