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At that time, First Independence, as highest bidder with an offer
of $50,000 at public auction, received a sheriff’s deed dated
June 27, 1996 (the sheriff’s deed).
The sheriff’s deed gave notice, in part, that “During the
six months immediately following the sale, the property may be
redeemed”.
Neither petitioner nor petitioner Rebecca Waters nor
petitioner’s father redeemed the Hazelwood property.
In March 1997, First Independence conveyed the Hazelwood
property by warranty deed to an unrelated third-party.
F. Petitioners’ Income Tax Return
On May 27, 1998, respondent received petitioners’ U.S.
Individual Income Tax Return, Form 1040, for 1997. The return
was signed by petitioners and dated April 28, 1998. Petitioners
did not apply for, or receive, any extension of time to file.
On their return, petitioners reported adjusted gross income
of $64,806.99 and taxable income of zero. Petitioners reported
no tax liability and claimed a refund in the amount of the tax
that had been withheld from petitioner’s wages as a teacher.
Petitioners itemized their deductions for 1997. In this
regard, petitioners attached Schedule A, Itemized Deductions, to
their return and claimed total itemized deductions of $311,514.
4(...continued)
escrow deficiency of $1,324.
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