Michael Joseph Major - Page 4

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               On the basis of respondent’s adjustments to petitioner’s               
          1999 return, respondent concluded that petitioner’s tax liability           
          was $2,633.58, which was offset by the earned income credit of              
          $2,791, resulting in an overpayment of $157.42.  Respondent                 
          applied the overpayment to taxes petitioner owed for 1995.                  
               2.   Corrections to Petitioner’s 2000 Return                           
               Petitioner attached to his 2000 return Schedule D, Capital             
          Gains and Losses, on which he reported short-term capital losses            
          of $4,499.51.  He did not claim a short-term capital loss on his            
          Form 1040, U.S. Individual Income Tax Return.  Respondent allowed           
          a short-term capital loss of $3,000.  Petitioner claimed a $6,350           
          standard deduction for head of household on his 2000 return; the            
          correct amount for 2000 was $6,450.  Respondent corrected that              
          error.  Respondent also allowed petitioner an earned income                 
          credit of $2,596 for Martin and Marlon for 2000.                            
               On the basis of respondent’s adjustments to petitioner’s               
          2000 return, respondent concluded that petitioner’s tax liability           
          was $2,861, which was offset by the allowed earned income credit            
          of $2,596, resulting in a net balance due of $265.  Petitioner              
          paid the $265, plus interest, on June 22, 2001.                             
          C.   Notices of Deficiency                                                  
               Respondent sent notices of deficiency to petitioner for 1999           
          and 2000.  Respondent disallowed petitioner’s claimed Schedule C            
          business expenses of $37,792 (including $2,023 for bad debts,               






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