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(2001 joint return).5 Thereafter, they filed their 1999 joint
return and their 2001 joint return.6 In the 1999 joint return,
petitioners reported wage income of $92,276 and claimed an
exclusion from gross income of $79,781 ($79,781 exclusion of 1999
wages). In the 2001 joint return, petitioners reported wage
income of $99,980 and claimed an exclusion from gross income of
$99,980 ($99,980 exclusion of 2001 wages). On page 1, line 21 of
the 2001 joint return, petitioners included the following nota-
tion with respect to the $99,980 exclusion of 2001 wages: “CODE
SEC 931 DEDUCT-SEE ATTACHED”. Petitioners attached to the 2001
joint return a document entitled “Federal Supplemental Informa-
tion” (petitioners’ attachment to their 2001 joint return). That
document stated: “TAXPAYER WORKED ON JOHNSTON ISLAND ATOLL
DURING TAX YEAR AND SUBSEQUENT TO TITLE 26, VOL. 10, PART 1
(SECTIONS 1.908 TO 1.1000), 26CFR 1.931-1 (REVISION 4-1-97),
TAXPAYER IS ENTITLED TO EXCLUDE EARNINGS FROM REPORTABLE INCOME.”
(Reproduced literally.)
Respondent issued to petitioners a notice of deficiency
(notice) with respect to their taxable years 1999 and 2001. In
that notice, respondent determined, inter alia, to disallow
5On Feb. 26, 2000, and Feb. 27, 2002, respectively, Leland
Rubesh signed the 1999 joint return and the 2001 joint return as
return preparer.
6The record does not disclose the respective dates on which
petitioners filed their 1999 joint return and their 2001 joint
return.
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