Larry J. and Sherilyn Wadsworth - Page 3

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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