Philip and Margery Skalka - Page 4

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          tax credit.  Petitioners concede in the stipulation that they are           
          not entitled to a miscellaneous itemized deduction of $89.10                
          claimed on Schedule A.  However, the $89.10 miscellaneous                   
          itemized deduction was one of the computational errors that                 
          resulted in the $9,481 of tax previously assessed pursuant to               
          section 6213(b)(1).  The parties further stipulated that                    
          petitioners made a total of $70,308.20 in Federal tax payments              
          for the year at issue.2                                                     
               At trial, the parties orally stipulated that $32,029 of gain           
          from the sale of business real estate which was not included in             
          income on petitioners’ tax return is includable in income as a              
          capital gain.  The testimony of Philip Skalka (petitioner)                  
          corroborated this further stipulation.  However, the parties                
          dispute at which capital gains tax rate the $32,029 capital gain            
          is to be taxed.                                                             
               After the trial, respondent filed an answer seeking an                 
          increased deficiency of $8,006, for a total deficiency of                   
          $12,866.  See sec. 6214(a).  It is well established that the                
          Court has jurisdiction to review an increased deficiency asserted           
          by the Commissioner at or before the hearing or rehearing.  Sec.            


               2  Respondent’s recalculation of petitioners’ tax liability            
          reflects that petitioners made only $69,829 in Federal tax                  
          payments for 1997.  In accordance with the holding in this                  
          opinion, respondent shall apply the stipulated tax payment amount           
          of $70,308.20 when preparing the Rule 155 computation.                      




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