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Petitioners reported $7,000 in rent received from Property A
and $7,000 in rent received from Property B on Schedule E of
their return. While the Court is perplexed as to why petitioners
would have inflated the rent received, we do find that they did,
indeed, report rent received on their 2002 return. Petitioners
did not, however, report the correct amount of rent received,
which was $5,500. We hold, therefore, on the basis of Mrs.
Burkley’s admission, that petitioners must include only $5,500 of
rental income for taxable year 2002.
Dependency Exemption Deductions
Petitioners claimed five dependency exemption deductions on
their 2002 return. Petitioners listed three minor children--
M.Y., L.B., and J.B--and two adults--Fred Henigan and Harold
Burkley--as dependents. In the answer, respondent asserted that
petitioners are not entitled to the five claimed dependency
exemption deductions on the grounds that: (1) Petitioners had
failed to prove their entitlement to claim a dependency exemption
deduction for any of the individuals listed on their return, and
(2) they failed to maintain adequate records to substantiate
amounts paid in support of the claimed dependents.
Section 151 allows deductions for personal exemptions,
including exemptions for dependents of a taxpayer. See sec.
151(c). Section 152(a) defines the term “dependent” in pertinent
part to include a son or daughter of the taxpayer, or a
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