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Respondent determined the following deficiencies in
petitioners’ Federal income taxes and accuracy-related penalties
under section 6662(a):
Penalty
Year Deficiency Sec. 6662(a)
2001 $5,674 $1,134.80
2002 18,003 3,600.60
2003 11,840 2,368.00
Petitioners have not contested some of the adjustments
respondent made that give rise to the deficiencies in question.2
Other adjustments are computational,3 and the resolution of those
adjustments depends on our resolution of the substantive issues
for decision.
2In the notice of deficiency, respondent (1) disallowed a
deduction of $1,600 for self-employed health insurance for 2001,
(2) increased petitioners’ 2001 dividend income from $1,692 to
$1,881, (3) increased petitioners’ self-employment taxes for 2002
and 2003 from $879 reported on the 2002 return to $7,002 and from
$14,979 reported on the 2003 return to $15,397, and (4)
disallowed the $427 alternative minimum tax (AMT) foreign tax
credit carried forward from 2002 to 2003 resulting in AMT of
$1,459 for 2003. In the petition, petitioners did not assign
error to those adjustments.
3Respondent made the following computational adjustments
resulting from the adjustments to income: (1) Increased the
taxable amount of Social Security benefits for 2001 from $278
reported on the return to $6,574, (2) increased the deductions
for self-employment tax for 2002 and 2003 from $440 reported on
the 2002 return to $3,501 and from $7,490 reported on the 2003
return to $7,699, and (3) reduced the deduction for exemptions
for 2003 from $5,978 reported on the 2003 return to $5,124.
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