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MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: By notice of deficiency dated January 22,
2001 (the notice of deficiency), respondent determined
deficiencies in, and penalties with respect to, petitioners’
Federal income tax as follows:
Penalty
Year Deficiency (Sec. 6662(a))
1994 $25,310 $5,062.00
1995 3,749 -0-
1996 19,408 3,881.60
Petitioners timely filed a petition for redetermination. The
issues for decision are whether petitioners: (1) Properly
characterized gains and losses (i.e., as ordinary rather than
capital) attributable to petitioner Herman Welter’s commodities
trading activities during the years at issue and (2) are liable
for the penalties determined by respondent.1
Unless otherwise noted, 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.
1 The parties stipulated that petitioners improperly
omitted from income in 1995 and 1996 amounts attributable to a
sec. 481 adjustment resulting from a prior audit. The parties
further stipulated: (1) Petitioners are entitled to increased
standard deductions for 1995 and 1996, and (2) respondent’s
adjustments relating to a net operating loss deduction for 1995,
self-employment income for 1995 and 1996, and Social Security
benefits for 1994, 1995, and 1996 are computational. We need not
further discuss those issues.
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