Danvis S. and Sheryl S. Smith - Page 3

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               Respondent determined deficiencies in petitioners’ Federal             
          income taxes of $8,993 and $5,053, and accuracy-related penalties           
          of $1,799 and $1,011, respectively, for the taxable years 1995              
          and 1996.                                                                   
               The issues for decision are:  (1) Whether petitioners are              
          entitled to charitable contribution deductions in 1995 and 1996;            
          (2) whether petitioners are entitled to certain miscellaneous               
          itemized deductions in 1995 and 1996 and business expense                   
          deductions in 1995; and (3) whether petitioners are liable for              
          accuracy-related penalties under section 6662(a) for 1995 and               
               Some of the facts have been stipulated and are so found.               
          The stipulations of fact and the attached exhibits are                      
          incorporated herein by this reference.  Petitioners resided in              
          Highlands Ranch, Colorado, on the date the petition was filed in            
          this case.                                                                  
          Charitable Contribution Deductions                                          
               During the years in issue, petitioner husband (petitioner)             
          was the director of Alpha Ministries.  Petitioners provided                 
          nearly all of the funds used by Alpha Ministries, and nearly all            
          of these funds were in turn used to pay for expenses of                     

          1Petitioners concede respondent’s determination that they                   
          received $123 in unreported interest income in 1995.  Respondent            
          determined that petitioners were entitled to unclaimed deductions           
          in 1995 of $463 for investment interest expense and $62 for                 
          business office expense.                                                    

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