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Petitioner and Mr. Sturges received a combined income of
$1,714,931 during 2000.
The price of Cisco stock declined, and by late December 2000
Paine Webber informed petitioner and Mr. Sturges that the price
of Cisco shares had dropped to $34 or $35, precipitating a margin
call. Petitioner and Mr. Sturges sold some of the Cisco shares
to pay the margin call. Petitioner and Mr. Sturges held the
remaining Cisco shares. Petitioner and Mr. Sturges lost most of
the funds invested in the stock.
Petitioner and Mr. Sturgis own a four-bedroom, 2�-bath
residence. Before April 2001, a mortgage on the residence dated
December 15, 1998, secured a $377,550 debt. In April 2001,
petitioner and Mr. Sturges refinanced the residence. The new
mortgage secured a debt of $358,000.
In April 2001, petitioner’s accountant informed petitioner
that her and Mr. Sturges’s 2000 Federal income tax would exceed
the amount withheld by Cisco by approximately $141,000.
Petitioner called both Cisco and Paine Webber because she thought
there was an error regarding the amount withheld and/or set aside
to pay taxes.
Petitioner and Mr. Sturges filed for an automatic extension
to August 15, 2001, to file their 2000 return. They filed a
joint Form 1040, U.S. Individual Income Tax Return, for 2000 on
August 15, 2001. On the 2000 return, they reported a total tax
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