J. Michael and Susan Reimer - Page 3




                                        - 2 -                                         
               Respondent determined the following deficiencies, additions            
          to tax, and penalties with respect to petitioners’ Federal income           
          taxes:                                                                      
                                        Addition to Tax     Penalty                   
          Year           Deficiency     Section 6651(a)    Section 6662(a)            
               1993      $3,937              $237                $787                 
               1994      6,917               287                 1,383                
               1995      6,330          568                      1,266                
          After concessions by respondent,1 the issues for decision are:              
          (1) Whether petitioners’ horse breeding operation was an activity           
          engaged in for profit within the meaning of section 183(a); (2)             
          whether petitioners’ water and air filtration operation was an              
          activity engaged in for profit within the meaning of section                
          183(a); (3) whether petitioners are liable for additions to tax             
          for failure to timely file returns under section 6651(a) for the            
          taxable years 1994 and 1995; and (4) whether petitioners are                
          liable for accuracy-related penalties pursuant to section 6662(a)           
          for the years in issue.                                                     
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the attached exhibits are                      
          incorporated herein by this reference.  At the time the petition            
          was filed, petitioners resided in Montgomery, Illinois.                     



               1    Respondent concedes that there is no addition to tax              
          under sec. 6651(a) due from petitioners for 1993.  Respondent               
          further concedes $252 of the sec. 6651(a) addition to tax for               
          1995 due to respondent’s failure to credit petitioners with                 
          $5,035 of withheld income taxes.                                            





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