A. Wayne and Linda D. Doudney - Page 4

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          documentation regarding the dependency exemption for a child and            
          for the following items:                                                    
               Description of item                   1999      2000                   
               Short-term capital loss            ($1,889)     -0-                    
               Long-term capital loss             (531)     -0-                       
               Schedule C expenses                42,655  $42,567                     
               Schedule F expenses                15,171    15,988                    
               Real estate taxes                  8,445     -0-                       
               State/local income taxes           -0-    3,922                        
               Charitable contributions           22,636   23,127                     
               Unreimbursed business expenses    8,532     -0-                        
               Rate reduction credit              -0-      300                        
          On a date that does not appear in the record, petitioners sent              
          respondent documentation substantiating certain of the items.               
          Respondent allowed the losses and Schedule A deductions that                
          petitioners substantiated.6                                                 
               On January 21, 2004, respondent issued separate notices of             
          deficiency for 1999 and 2000 that disallowed petitioners’                   
          remaining capital losses, increased petitioners’ capital gains,             
          disallowed the remaining disputed expenses from Schedules A, C,             
          and F for lack of substantiation, and imposed additions to tax              
          for failing to file timely returns.  On February 27, 2004,                  
          petitioners filed timely petitions contesting respondent’s                  
          determinations.                                                             

               6For 1999, respondent allowed real estate taxes of $7,140              
          and cash contributions of $15,375.  In 2000, respondent allowed a           
          deduction for State and local income taxes of $2,603 and the                
          standard deduction of $7,350.  For 1999, respondent also allowed            
          a short-term capital loss of $469.46.  However, respondent also             
          determined an unreported long-term capital gain in 1999 of                  
          $9,882.80.  The long-term capital gain is still in dispute.                 






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