W. Bradford Davis and Tedde M. Rinker - Page 45

                                       - 45 -                                         
          as to the underpayments resulting from Dr. Rinker’s claimed gross           
          receipts and business deductions.                                           
               c.  Deductions for Home Mortgage Points                                
               The record also indicates that petitioners relied on Mr.               
          Hertz to determine the proper amount of their deduction for                 
          personal interest.  Dr. Rinker testified that she gave Mr. Hertz            
          all of the records relating to her home mortgage and relied on              
          him to determine the proper deduction because she had “no idea,             
          looking at mortgage papers, what is tax-deductible and what                 
          isn’t.  And I just told * * * [Mr. Hertz] to figure it out.”   We           
          therefore conclude that petitioners had reasonable cause and                
          acted in good faith as to the underpayment attributable to                  
          petitioners’ erroneous deduction of home mortgage points.                   
               d.  Deductions for Personal Medical Expenditures                       
               The record does not reveal that petitioners had reasonable             
          cause and acted in good faith with respect to their claimed                 
          $11,693 in deductible medical expenses.  Regardless of whether              
          the erroneous deductions were results of Mr. Hertz’s negligence             
          or otherwise, petitioners had significant “warning signs” that              
          their deductions for medical expenditures were improper.  As                
          noted above, petitioners carried employer-provided medical                  
          insurance, and many of the claimed expenditures were covered by             
          the terms of the insurance policy.  See Allen v. Commissioner,              
          925 F.2d at 353.  We therefore sustain respondent’s application             






Page:  Previous  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  Next

Last modified: May 25, 2011