Cheryl McKnight - Page 24

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          the $17,516 underpayment, but we hold that respondent abused his            
          discretion in not granting petitioner relief for the balance of             
          the $17,516 underpayment and the related penalty, additions to              
          tax, and interest.  Such additional relief is to be granted to              
          petitioner.                                                                 
               To reflect the foregoing,                                              
                                             Decision will be entered                 
                                        under Rule 155.7                              





















               7  Under our holding herein, refunds to petitioner relating            
          to petitioner and John’s underpayment and deficiency may be                 
          limited, respectively, under Rev. Proc. 2003-61, sec. 4.04(2),              
          and sec. 6015(g)(3).  In the Rule 155 computation, the parties              
          are to resolve how petitioner’s various payments are to be                  
          allocated among the underpayment, the deficiency, and the                   
          penalty, additions to tax, and interest.                                    





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