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Respondent determined deficiencies in petitioners’ Federal
income taxes and accuracy-related penalties in the following
amounts:
Year Deficiency Sec. 6662(a)
1996 $39,965 $7,993.00
1997 36,817 7,363.40
After concessions by respondent of the medical expense
issues, this Court must decide: (1) Whether petitioners were not
engaged in an activity for profit under section 183, (2) whether
petitioners were entitled to claimed Schedule F, Profit or Loss
From Farming, deductions for the taxable years in issue, and (3)
whether petitioners were liable for accuracy-related penalties
under section 6662(a) for the taxable years in issue.
Some of the facts in this case have been stipulated and are
so found. Petitioners’ residence was in Myrtle Creek, Oregon, at
the time they filed their petition.
Petitioners timely filed Forms 1040, U.S. Individual Income
Tax Return, for 1996 and 1997. On the Forms 1040 for both years,
petitioner John R. Garbini (petitioner) listed his occupation as
rancher. Petitioner Edith M. Garbini’s occupation was listed as
housewife. Both petitioners were senior citizens during the
taxable years in issue. For each taxable year in issue,
petitioners attached to their Form 1040, Schedule F, Profit or
Loss From Farming. On Schedule F for 1996, petitioners reported
no gross income and deducted expenses in the amount of $127,341,
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