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net earnings from self-employment that were attributable to his
distributive share of the income or loss of Gold Coast.
In a notice of deficiency, respondent determined increases
in petitioners’ 2001 and 2002 income of $990,700 and $165,116,
respectively, as well as associated reductions in petitioners’
itemized deductions and exemptions. Respondent determined
deficiencies of $147,708 and $56,958 in petitioners’ 2001 and
2002 Federal income taxes, respectively. Respondent also
determined section 6662(a)1 penalties of $29,541.60 and
$11,125.60 for 2001 and 2002, respectively.
Respondent attached a Form 4549A, Income Tax Examination
Changes, to the notice of deficiency. On the Form 4549A,
respondent listed adjustments to itemized deductions, exemptions,
and “Sch E - Inc/Loss-Prtnrship/S Corps-Passve/Non-Passve” for
2001 and 2002. Respondent also attached a Form 886-A,
Explanations of Items, to the notice of deficiency. On the Form
886-A, under the table for “Sch E - Inc/Loss-Prtnrship/S Corps -
Passve/Non-Passve” adjustments for 2001 and 2002, respondent
entered “your distributive share of the partnership income or
loss [is adjusted] as shown in the attached computation.” In his
answer (discussed below), respondent asserts that the adjustments
in the notice of deficiency relate to respondent’s determination
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
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Last modified: May 25, 2011