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Respondent determined a deficiency in petitioners' 1998
Federal income tax of $2,558. The parties agree that respondent
correctly determined that petitioners have unreported income of
$7 from the refund of State income tax for the prior year.
The issue remaining for decision is whether petitioners are
entitled to deduct on Schedule A, Itemized Deductions,
educational expenses of $20,317. Respondent did not challenge
petitioners' entitlement to additional itemized deductions of
$3,794. Because the amount of unchallenged itemized deductions
is less than the standard deduction, respondent allowed the
standard deduction in the deficiency determination.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits received in evidence
are incorporated herein by reference. At the time the petition
was filed, petitioners resided in York, South Carolina.
Background
Tracy L. McEuen (petitioner) earned a B.A. degree, with
distinction, in mathematics and economics, from Indiana
University in 1992 and began working at Merrill Lynch (M-L) the
same year. Petitioner was employed as a "financial analyst" at
M-L. Financial analysts could remain at M-L for a maximum of 3
years, as did petitioner. To become an "associate" at M-L, a
candidate was required to have an M.B.A. degree. Petitioner left
M-L in 1995.
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