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notice stem primarily from the unreported bond interest of
$10,255.1
Petitioner admits that the bond interest of $10,255 was not
reported in her 2000 tax return but contends that such interest
could have been reported in tax returns for prior taxable years
prepared by either her deceased husband or her son. Petitioner
did not produce copies of such returns. Petitioner’s tax returns
for the 1998 through 2000 taxable years did not include any of
the $10,255 bond interest.
OPINION
As a general rule, interest received by or credited to the
taxpayer constitutes gross income and is fully taxable. Sec.
61(a)(4); sec. 1.61-7(a), Income Tax Regs. In particular,
interest on United States obligations–-such as U.S. savings
bonds--issued on or after March 1, 1941, is fully taxable. Sec.
1.61-7(b)(3), Income Tax Regs. “A taxpayer using the cash
receipts and disbursements method of accounting who owns United
1 The notice of deficiency also contains an adjustment to
income of $4,281 with respect to taxable Social Security
benefits. The adjustment results from an increase in
petitioner’s “modified adjusted gross income” under sec. 86 due
to the inclusion of unreported bond interest of $10,255. The
adjustment also relies upon a Form 1099-SSA to assume that
petitioner received Social Security benefits of “$14,130” during
the 2000 taxable year. However, petitioner disputed this amount
by submitting to the Court a revised tax return for the 2000
taxable year which reflected Social Security benefits of
“$14,103”. We conclude that the amount of Social Security
benefits received by petitioner in 2000 was $14,103.
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Last modified: May 25, 2011