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accuracy-related penalty under section 6662. After concessions,
the issues remaining for our consideration are: (1) Whether
Kenneth W. Graves’s (petitioner) bad debt, which arose in the
course of his business as an employee, is deductible in computing
adjusted gross income or an itemized deduction in computing
taxable income; (2) whether the bad debt is $85,009 as determined
by respondent or $86,040 as now claimed by petitioners; and (3)
whether petitioners are liable for the addition to tax and
penalty under sections 6651(a)(1) and 6662, respectively.
FINDINGS OF FACT2
Petitioners resided in San Dimas, California, on the date
their petition was filed. They filed a joint Federal income tax
return for their 1996 taxable year. With respect to their 1996
return, petitioners sought a filing extension to August 15, 1997.
No further extensions were sought after the expiration of the
extension. Twenty months later, on April 16, 1999, petitioners
filed their 1996 Federal income tax return. During 1996,
petitioners received interest income. Petitioner received
pension income and unemployment compensation as well as a salary.
Mrs. Graves3 received salary and miscellaneous income as an
employee of two companies.
2 The parties’ stipulation of facts is incorporated by this
reference.
3 Mrs. Graves is a party in this case because petitioners
filed a joint return for 1996.
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