J. McLean and Judy A. Durfey - Page 4

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                     Payor              Form        Type of Income   Amount           
          Alpine School District      W-2       Wages                $174             
          New Mexico Educators FCU    1099-INT  Interest             40               
          State of New Mexico         1099-G    State income tax refund  1,029        
          New Mexico Educational      1099-R    Pensions, annuities, 13,004           
          Retirement Board                      retirement                            
          Social Security Administration1099-SSA Social Security       6,685            
               In the notice of deficiency, respondent determined that                
          petitioner received unreported gross income of $19,929 in 2002,             
          consisting of the following:                                                
                         Source                  Amount                               
                    Wages                         $174                                
                    Interest                      40                                  
              State income tax refund     1,029                                      
               Taxable pension               13,004                                   
                    Taxable Social                                                    
                    Security benefits        5,682                                    
               Respondent also decreased petitioners’ Schedule A deductions           
          by $1,791, resulting in a total increase of $21,720 in their                
          taxable income.                                                             
                                     Discussion                                       
              In general, the Commissioner’s determinations set forth in a            
         notice of deficiency are presumed correct, and the taxpayer bears            
         the burden of showing that such determinations are in error.                 
         Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).                   
         Section 7491(a)(1) provides that the burden of proof as to                   
         factual matters shifts to the Commissioner under certain limited             








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