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Respondent determined deficiencies of $4,938 and $6,838 in
petitioners’ Federal income taxes for the years 1998 and 1999,
respectively, and the accuracy-related penalty under section
6662(a) of $1,367.60 for 1999.
After concessions by respondent,2 the issues remaining for
decision are: (1) Whether petitioners are entitled to exclude 30
percent of petitioner husband’s salary from gross income due to
his 30 percent disability; (2) whether petitioners are entitled
to an additional mortgage interest deduction of $5,567 under
section 461(g)(2) for 1999; and (3) whether petitioners are
liable for the section 6662(a) penalty for 1999. One other
adjustment, petitioners’ miscellaneous itemized deduction, is a
computational adjustment that is resolved by the Court’s holding
on the other issues.
Some of the facts were stipulated. Those facts, with the
exhibits annexed thereto, are so found and made part hereof.
Petitioners’ legal residence at the time the petition was filed
was Paso Robles, California.
2Respondent incorrectly amortized points petitioners paid in
the refinancing of their home mortgage over a 30-year period and
based part of the $5,567 disallowed interest on that calculation.
At trial, respondent conceded that petitioners had a 15-year
mortgage, and the points paid should be amortized over a 15-year
period. In addition, respondent conceded that petitioners were
entitled to an additional deduction of $866 in interest for 1999
based on evidence petitioners presented before trial.
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