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The meeting adjourned with no agreed-upon stipulation.
On May 17, 2005, respondent received (via facsimile) from
petitioners a set of documents that included petitioners’ 2002
Forms W-2, Wage and Tax Statement, petitioners’ joint 2002 Form
1040, U.S. Individual Income Tax Return, a joint Form 1040X,
Amended U.S. Individual Income Tax Return for 2002, and pictures
of the South Green Street property and another rental property
located at 11036 South Vernon Avenue.
On the basis of these documents, and pursuant to an order of
this Court dated May 23, 2005, respondent filed an answer on July
29, 2005, in which respondent raised numerous new issues that
resulted in an increased deficiency and a section 6662(a)
accuracy-related penalty. The answer raised the following new
issues: (1) Unreported rental income; (2) disallowance of five
dependency exemption deductions; (3) unreported income from a
State income tax refund; (4) disallowance, in total, of itemized
Schedule A deductions for (a) medical and dental expenses, (b)
real estate taxes, (c) personal property taxes, (d) home mortgage
interest, (e) gifts to charity, and (f) unreimbursed employee
business expenses; (5) disallowance in total of all Schedule E
deductions; and (6) disallowance of rental and real estate loss
because of passive activity loss limitations.
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