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On November 9, 2001, respondent issued a notice of
deficiency determining petitioners owed income tax deficiencies
of $17,097, $17,283, and $11,267 for the taxable years 1991,
1992, and 1993, respectively. Additionally, respondent
determined a $2,765 accuracy-related penalty pursuant to section
6662(a) for the tax year 1991.1
In the notice of deficiency, respondent made numerous
changes to items reported on petitioners’ returns for the
aforementioned years. After petitioners’ concessions,2 the
issues to be decided are: (1) Whether petitioners’ rental losses
for the taxable years 1991, 1992, and 1993 in the amounts of
$115,390, $48,974, and $21,309, respectively, are section 469
passive activity losses, and (2) whether petitioners are liable
for the section 6662(a) accuracy-related penalty for 1991.
1Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years at issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
2Petitioners conceded the following: (1) They had
unreported rental income in 1991 of $55,000 which should have
been included on their Schedule E, Supplemental Income and Loss;
(2) their total claimed depreciation deductions should be
decreased by $1,590, $15,005, and $22,005 for 1991, 1992, and
1993, respectively; and (3) they had additional unreported
capital gains of $1,464 for 1992.
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Last modified: May 25, 2011