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daughter. He purchased the unit with proceeds from the sale of
another property he had previously owned. Petitioner and Mr.
Elesh were divorced in late 1999.
For each of the years in issue, petitioner filed a joint
Federal income tax return with Mr. Elesh. The returns were
prepared by Donahue’s Accounting & Tax Service. The return
preparer was hired by Mr. Elesh, and petitioner had little or no
contact with him. Although petitioner did not review the tax
returns for the years in issue, she signed both of them.
Petitioner and Mr. Elesh claimed deductions for charitable
contributions made in cash of $8,574 in 1997 and $8,765 in 1998.
They also deducted losses from the rental property occupied by
petitioner’s daughter of $14,047 in 1997 and $15,632 in 1998. In
the statutory notice of deficiency, respondent disallowed the
claimed cash charitable contribution deductions because they were
not “verified as paid”.2 Respondent disallowed a portion of the
1997 rental loss deduction and the entire 1998 rental loss
deduction based on their status as passive activity losses. In
addition, respondent determined that petitioner and Mr. Elesh
were liable for accuracy-related penalties under section 6662(a)
with respect to the entire amount of the underpayments in 1997
and 1998.
2Petitioner and Mr. Elesh also claimed noncash charitable
contribution deductions of $485 in 1997 and $490 in 1998. These
deductions were not disallowed by respondent.
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