- 33 -
virtue of this disposition of the matter, respondent issued no
notice of deficiency to the Thompsons for 1984.
On March 4, 1988, DeCastro sent Speers a copy of the
Thompsons’ 1985 income tax return. As noted above, the
Thompsons’ 1985 income tax return did not reflect any Kersting
deductions (although it did include Bauspar deductions). In a
letter dated March 25, 1988, Speers notified the Thompsons that
she “was able to verify that interest from the Kersting project
was not deducted” on that return. Respondent issued no notice of
deficiency to the Thompsons for 1985.
E. The Reporting and Resolution of the Thompsons’
Deficiency Interest Payments for 1986 and 1987
The Thompsons claimed their $59,545 interest payments to the
IRS as an itemized interest deduction on Schedule A - Itemized
Deductions of their 1986 income tax return. However, because
their adjusted gross income for that year was relatively low, the
Thompsons were able to use only $16,251 of the $59,545 deduction.
The Thompsons did not claim any Kersting or Bauspar deductions on
their 1986 return.
Poltash prepared the Thompsons’ 1987 income tax return. On
that return, the Thompsons deducted $27,914 as interest paid to
the IRS. That figure represents 65 percent of $42,945. See
supra note 14. Apparently, the Thompsons were attempting to
carry over the unused portion of the interest deduction of
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