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return for 1998. On May 25, 1999, petitioner wrote to the IRS,
stating that he and his wife “have chosen to follow the
instructions in your 1040 Booklet and file our annual response in
the form of a statement in accordance with the new Privacy Act
Notice for 1998.” They stated that they were not filing a tax
return for 1998 because: “We still sincerely believe that we are
not a person liable or required to file a 1040 U.S. Individual
Income Tax Return for 1998.”
Federal income tax of $14,833 was withheld from petitioner’s
wages in 1998. Petitioner paid home mortgage interest of
$9,342.20, real estate taxes of $4,168.74, and investment
interest of $25,582 in 1998.
In the notice of deficiency, respondent determined that
petitioner had capital gain of $1,100,526, consisting of $35 from
Vanguard, $104 from First Chicago, $1,099,313 from Schwab, and an
additional $1,074 from Schwab. Respondent determined that
petitioner’s gain on the sale of stocks was equal to the net sale
price of those stocks.
E. Posttrial Procedures
At trial, petitioner lacked substantiation of his bases in
some of his IBM and Merck stock. Respondent agreed to our
holding the record open for 90 days to receive a supplemental
stipulation from the parties relating to petitioner’s bases in
certain IBM and Merck stock, the amount of petitioner’s
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