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After trial, respondent filed a motion for leave to file
amendment to answer asserting increased deficiencies as a result
of petitioners’ failure to report $67,437 for 1995 and $87,942.76
for 1998 and additions to tax under section 6651(a)(1) and (2)
for failure to timely file their 1998 income tax return and to
timely pay the tax shown as due on that return.
After concessions,1 the issues for decision are:
1. Whether petitioner2 had unreported income in 1995 of
$112,255.84 as respondent contends, or $70,587 as petitioners
contend, from the settlement of his claim for attorney’s fees.
Resolution of this issue depends on resolution of the following
issues:
a. Whether the statute of limitations bars assessment
of these amounts. We hold that it does not.
b. Whether petitioners are taxable on $47,443.51
petitioners’ children received from the Anis Recovery Fund
partnership. We hold that they are.
c. Whether the fair market value of petitioner’s
22.375 percent interest in two parcels of real property in which
1 Petitioners concede that, because they had a reasonable
prospect of recovery in 1999, the $393,954 embezzlement loss is
not deductible in 1999. Petitioners also concede that they are
not entitled to business expense deductions for 1998 and 1999.
Respondent concedes that Martha A. Graham is not liable for the
fraud penalty.
2 References to petitioner are to Albert M. Graham, Jr.
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