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Respondent determined deficiencies of $6,984 and $8,589 in
petitioners' Federal income taxes, respectively, for 1998 and
1999 and corresponding penalties under section 6662(a) in the
amounts of $1,396 and $1,717. After concessions by respondent,2
the issues for decision are: (1) Whether, for the years 1998 and
1999, petitioners are entitled to itemized deductions for
charitable contributions; (2) whether, for the year 1998,
petitioners are entitled to an itemized deduction for
2 In the notice of deficiency, respondent disallowed some
of the itemized deductions on Schedule A, Itemized Deductions,
claimed by petitioners. The remaining itemized deductions that
were not disallowed totaled less than the standard deduction
allowed under sec. 63(c); consequently, respondent allowed
petitioners the standard deduction for each year at issue. In
the written stipulation submitted at trial, respondent agreed to
petitioners' entitlement to some of the disallowed expenses, as
follows:
1998 1999
State and local taxes $ 2,351 $ 2,265
Real estate taxes –– 1,922
Home mortgage interest 11,025 14,072
Gambling losses –- 1,920
Totals $13,376 $20,179
During the trial, respondent further conceded petitioners'
entitlement to an itemized deduction of $1,570 for real estate
taxes for 1998. As a result of these concessions, coupled with
those itemized deductions that were not disallowed in the notice
of deficiency, respondent conceded that petitioners were entitled
to itemized deductions for both years in lieu of the standard
deduction. Respondent further conceded that the self-employment
tax computation in the notice of deficiency relating to
petitioners' trade or business activity was in error, and the
self-employment tax for that activity should be computed on net
profits rather than on the amount of the disallowed expenses as
calculated in the notice of deficiency.
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