Court Opinion

ID: 4336850
Source: CourtListenerOpinion
Date Created: 2018-11-14 03:02:30.030721+00
Date Added: 2024-06-11T14:20:07.625078
License: Public Domain

T.C. Summary Opinion 2007-197

                      UNITED STATES TAX COURT

          CHAD W. AND ALIZA KOLD-WARREN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 24445-05S.            Filed November 21, 2007.

     Chad W. and Aliza Kold-Warren, pro se.

     Michael S. Hensley, for respondent.

     WHALEN, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.   All section references are to the

Internal Revenue Code in effect for the year in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure, unless otherwise indicated.   Pursuant to section

7463(b), the decision to be entered is not reviewable by any
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other court, and this opinion shall not be treated as precedent

for any other cases.

     The Court issued a bench opinion in this case on November

16, 2006, and directed therein that the decision be entered

pursuant to the procedures set forth in Rule 155 of the Tax Court

Rules of Practice and Procedure.    In accordance with those

procedures, each party submitted a computation of the deficiency.

Respondent’s Computation for Entry of Decision was filed March

21, 2007.    Petitioners’ Alternative Computation for Entry of

Decision was filed April 5, 2007.      Respondent’s Reply to

Petitioners’ Alternative Computation for Entry of Decision,

referred to herein as respondent’s revised computation, was filed

June 15, 2007.    The case is before the Court to resolve the

differences between the parties regarding the amount of the

deficiency to be entered by the Court.

     Respondent’s original computation asks the Court to

redetermine a deficiency for 2002 of $10,246 and to redetermine

petitioners’ liability for a penalty of $2,049.20 under section

6662(a).    Respondent’s revised computation concedes that the

original computation is incorrect on a number of points.

Respondent’s revised computation asks the Court to decide that

there is a deficiency of $5,913 in petitioners’ income tax for

2002, as computed in respondent’s revised computation, and to

decide further that petitioners are liable for an accuracy-
                                -3-

related penalty under section 6662(a) in the amount of 20 percent

of the deficiency, or $1,182.60.

     Petitioners’ alternative computation asks the Court to

decide that the amount of the deficiency is $2,225.    Petitioners’

computation does not discuss the accuracy-related penalty under

section 6662(a).   Nevertheless, we note that the Court expressly

sustained respondent’s determination of the accuracy-related

penalty in its bench opinion, and petitioners’ liability for the

accuracy-related penalty under section 6662(a) is not in issue in

these proceedings under Rule 155.     The decision in this case will

include petitioners’ liability for an accuracy-related penalty in

the amount of 20 percent of the deficiency.

     A summary of the deficiency computations of both parties is

appended hereto as Appendix.   There are six differences between

petitioners’ computation and respondent’s revised computation.

The attached summary highlights those six differences.    We

address each of them below.

     Item No. 1:   Petitioners’ computation claims a capital loss

of $1,848, whereas respondent’s revised computation allows a

capital loss of $1,719, a difference of $129.    Paragraph 13 of

the Stipulation of Facts states that petitioners incurred a

capital loss of $1,719 during 2002.    Accordingly, the capital

loss allowed in respondent’s revised computation is correct.
                                  -4-

     Item No. 2:   Petitioners’ computation claims miscellaneous

deductions, subject to the 2-percent of adjusted gross income

limitation, of $18,191, whereas respondent’s revised computation

allows a higher amount, $18,360, a difference of $169.     The

amount allowed by respondent is the sum of $16,672, and $1,688.

These amounts are set forth in paragraphs 6 and 7 of the

Stipulation of Facts, respectively.     They relate to deductions

for depreciation and other automobile expenses for the

unreimbursed employee business use of petitioners’ truck.

Accordingly, the miscellaneous deductions, subject to the 2-

percent of adjusted gross income limitation, allowed in

respondent’s revised computation, $18,360, is correct.

     Item No. 3:   Petitioners’ computation calculates tax of

$8,439, based upon taxable income of $59,421.52, whereas

respondent’s revised computation calculates tax of $9,827, based

upon taxable income of $59,384.    The tax computed by respondent

is $1,388 more than the tax computed by petitioners.

Respondent’s tax computation, based upon the tax table for

married individuals filing joint returns, is correct, i.e.,

(($59,384-$46,700) x .27) +$6,405.

     Item No. 4:   Petitioners compute no alternative minimum tax,

whereas respondent’s revised computation computes alternative

minimum tax of $1,688.   The alternative minimum tax is not

mentioned in the Stipulation of Facts, and it was not raised as
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an issue at trial.    In their computation, petitioners point out

that alternative minimum tax of $1,553 was reported on their

return for 2002, but no alternative minimum tax was determined

“per exam”.   In effect, petitioners’ computation suggests that

alternative minimum tax is not applicable because none was

computed in the notice of deficiency.

     We disagree.    There is nothing in the record to suggest that

respondent conceded the alternative minimum tax in this case, and

petitioners have shown no reason why the alternative minimum tax

is not applicable.    No alternative minimum tax was determined by

respondent in the notice of deficiency because there was no

excess of tentative minimum tax over regular tax, based upon the

adjustments determined in the notice of deficiency.       See sec.

55(a).   Based upon the adjustments redetermined in these

proceedings, the situation is different.       This is simply a

computational matter.    We agree with respondent that alternative

minimum tax is applicable, and we agree with the amount computed

in respondent’s revised computation, $1,688.

     Item No. 5:     Petitioners claim a child tax credit of $500,

the same amount claimed on their return, whereas respondent’s

revised computation allows zero.     Respondent disallowed the child

tax credit in the notice of deficiency as a result of the

application of the limitation based on petitioners’ adjusted

gross income.   See sec. 24(b)(1).      Similarly, based upon the
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adjusted gross income redetermined in these proceedings,

petitioners are still not entitled to the child tax credit by

reason of the limitation set forth in section 24(b)(1).

     Item No. 6:   Petitioners’ computation claims a credit for

Federal income tax withheld of $5,714, whereas respondent’s

revised computation allows a credit of $5,602, or $112 less.    We

note that petitioners’ return claimed a refund of $112.

Respondent’s revised computation correctly reduced the amount of

the credit for Federal income tax withheld by the amount claimed

by petitioners as a refund on their return.

     For the reasons set forth above, we agree with the

computation of the deficiency set forth in respondent’s revised

computation.   Accordingly,

                                      Decision will be entered in

                               accordance with respondent’s reply

                               to petitioners’ alternative

                               computation for entry of decision.
                                            -7-
                                      Appendix

                               Petitioners        Respondent               Differences

Wages                          128,299.00         128,299.00
Taxable interest                 2,456.00           2,456.00
Dividends                           22.00              22.00
Capital gain or loss            -1,848.00          -1,719.00    -129.00        1
Rental real estate losses      -25,000.00         -25,000.00
Other income: gambling          18,947.00          18,947.00

Adjusted gross income          122,876.00         123,005.00    -129.00

Medical and dental                 -0-                -0-
Taxes                           9,003.00           9,003.00
Home interest                  10,021.00          10,021.00
Contributions                     750.00             750.00

Miscellaneous deductions       18,191.00          18,360.00     -169.00        2
  subject to 2% AGI limit
2% AGI                          2,457.52           2,460.00       -2.48
Excess miscellaneous           15,733.48          15,900.00     -166.52
  deductions
Other miscellaneous            18,947.00          18,947.00
  deductions

Total itemized                 54,454.48          54,621.00     -166.52
  deductions

Adjusted gross income          122,876.00         123,005.00    -129.00
Total itemized deductions       54,454.48          54,621.00    -166.52

AGI less itemized deductions   68,421.52          68,384.00       37.52
Exemptions                     -9,000.00          -9,000.00       -0-

Taxable income                 59,421.52          59,384.00       37.52

Tax from tax table              8,439.00           9,827.00    -1,388.00       3
Alternative minimum tax            -0-             1,688.00    -1,688.00       4

Less credits (child care)         500.00              -0-        500.00        5

Total tax less credits          7,939.00          11,515.00    -3,576.00

Federal tax withheld            5,714.00           5,602.00      112.00        6

Deficiency                      2,225.00           5,913.00    -3,688.00