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Next, we consider the brokerage commission rebates that
petitioner failed to include in gross income for 1987 and 1988.
The question we consider with respect to those adjustments is
whether there was adequate disclosure of such reductions from
gross income. Petitioner disclosed on his returns that he was
reducing his income by the amount of the rebates reflected on the
Forms 1099 he issued and thus adequately disclosed his position.
Accordingly, petitioner is not subject to the substantial
understatement additions to tax for 1987 and 1988 with respect to
the understatement attributable to the rebate determination.
The adjustment concerning petitioner’s claim that he is
entitled to deduct all of the losses from the horse breeding
activity at JAC Ranch for 1987 through 1991 is one that likewise
was dependent as a threshold matter upon petitioner’s being able
to file a joint return with Mrs. Corrigan. As already explained,
there was no disclosure on the returns that petitioner and Mrs.
Corrigan were divorced and, therefore, not entitled to file a
joint return. Likewise, it was not reasonable to claim joint
filing status at a time when petitioner knew he was divorced.
Accordingly, petitioner may be subject to the substantial
understatement additions to tax for 1987 and 1988 as to the
losses claimed from the JAC Ranch.
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