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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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