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respondent’s Office of Appeals for consideration of petitioners’
amended return. During the remand, respondent audited
petitioners’ original and amended returns and issued to
petitioners a Supplemental Notice of Determination under section
6330 and a notice of deficiency under section 6213(a).6
In the notice of deficiency, respondent determined (1)
petitioners failed to report the correct amount of wages and
capital gains arising from the exercise of petitioner’s ISOs, (2)
petitioners were not entitled to certain itemized deductions, (3)
petitioners were liable for AMT in excess of that reported on
their original return, and (4) petitioners were liable for an
accuracy-related penalty. Specifically, respondent determined
that petitioners’ correct tax liability for 2000 totaled
$3,248,961--a sum comprising regular tax of $2,511,949 and AMT of
$737,012. Petitioners filed a petition for redetermination in
this case challenging the notice of deficiency.
At the conclusion of the trial in this case, the Court
directed the parties to file seriatim briefs. After petitioners
filed their opening brief, respondent filed an answering brief
and a motion for leave to file amended answer seeking an
increased deficiency and an increased accuracy-related penalty to
conform the pleadings to testimony offered by petitioner at
6 Petitioners’ collection review case at docket No. 16864-
02L was stayed pending the disposition of the instant case.
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