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Respondent determined for 1999 a deficiency in petitioners'
Federal income tax of $16,420 and an accuracy-related penalty
under section 6662(a) of $3,167.
In the petition, petitioners did not challenge respondent's
adjustments to their Schedule A, Itemized Deductions, totaling
$43,204. Pursuant to Rule 34(b)(4), Schedule A deductions in
excess of those stipulated by the parties are deemed conceded by
petitioners.
The issues remaining for decision are whether petitioners
are: (1) Entitled to deductions on Schedule C, Profit or Loss
From Business; (2) entitled to offset a rental real estate loss
against wage income; and (3) liable for an accuracy-related
penalty under section 6662(a).
The stipulated facts and the exhibits received into evidence
are incorporated herein by reference. At the time the petition
in this case was filed, petitioners resided in Chadds Ford,
Pennsylvania.
Background
A. Petitioner's Employment During 1999
1. Eli Lilly & Co.
Dr. Isaac William Hammond (petitioner) worked full time
throughout 1999 for Eli Lilly & Co. (Eli Lilly) conducting
pharmaceutical research. He received $149,615.82 as employee
wages from Eli Lilly in 1999.
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