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amount of the liability can be determined with reasonable
accuracy, and economic performance has occurred with respect to
the liability.” Sec. 1.446-1(c)(1)(ii), Income Tax Regs.
Here, as was the case with the outlay to Boss Day Planners,
the record suggests that some, if not all, of the requisites for
inclusion of the $123,250 in cost of goods sold have not been
met. Respondent is sustained on this issue.
IV. Reduction in Adjusted Gross Income
The parties’ positions with regard to the propriety of a
reduction in petitioners’ 1996 gross income center on the concept
of duplication. Petitioners contend that unless their gross
income for 1996 is reduced by $550,000, they will be taxed twice
on this amount. They allege that such a reduction was made with
respect to 1997 and that a like treatment should be accorded for
1996. Respondent contends that an adjustment was made to 1997 to
eliminate duplicate reporting for that year which does not exist
for the 1996 year.
Again, the underlying documentary record on this issue
leaves much to be desired. Mr. Goltz prepared petitioners’
original Forms 1040, U.S. Individual Income Tax Return, for 1996
and 1997. Subsequently, Mr. Leo prepared Forms 1040X, Amended
U.S. Individual Income Tax Return, for each of those years. On
the 1996 Form 1040X, petitioners reported an increase in adjusted
gross income of $550,000, derived from an additional $550,000 of
nonpassive income from partnerships and S corporations. On the
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