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On each Schedule E, petitioner characterized the Pepper Pike
residence as property “held for sale”. On line 23 of each
Schedule E, petitioner claimed the total expenses listed above,
respectively, as a “Deductible rental real estate loss”.
(Emphasis added.)
For each year, petitioner computed the adjusted gross income
reported on his return as follows:
1993 1994
Wages from Arthur Andersen $90,283.09 $74,620.35
State income tax refund 80.10 1,877.75
Rental real estate (31,513.04) (10,504.35)
Unemployment compensation --- 4,320.00
Adjusted gross income 58,850.15 70,313.75
The sale of the Pepper Pike residence is not reported on
petitioner’s 1994 return; it is reported on the 1994 return of
petitioner’s spouse as the sale of a principal residence subject
to section 1034.
For each year in issue, petitioner computed his taxable
income taking into account his election to itemize deductions.
In this regard, his Federal income tax return for each of those
years includes a Schedule A, Itemized Deductions. Among other
items, on the Schedules A, petitioner claimed medical expense
deductions computed as follows:
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