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6662(a) of $607.60 for 1999, $635.60 for 2000, and $69,217.40 for
2001.
After concessions,2 the issues for decision are:
1. Whether petitioners may deduct losses from Western
Timber Farms, Inc., for 1999, 2000, and 2001. We hold that they
may not.
2. Whether petitioners are liable for self-employment tax
for 2001. We hold that they are.
3. Whether petitioners may deduct $28,067 in expenses for
“leased payroll” for 2001. We hold that they may not.
4. Whether petitioners are liable for accuracy-related
penalties under section 6662(a) for 1999, 2000, and 2001. We
hold that they are.
FINDINGS OF FACT
A. Petitioners
Petitioners resided in Portland, Oregon, when they filed
their petition. In 1999, 2000, and 2001, Edward W. Arnold (Mr.
Arnold) was an accountant and Edith M. Arnold (Mrs. Arnold) was a
real estate agent. Mr. Arnold has been suspended from practice
before the Internal Revenue Service since 1981.
2 At trial, respondent reduced the claim for the accuracy-
related penalty under sec. 6662(a) to $5,509.80 for 2001.
Section references are to the Internal Revenue Code as
amended and in effect for the years in issue. Rule references
are to the Tax Court Rules of Practice and Procedure.
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