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the increased deficiencies and additions to tax asserted in his
FINDINGS OF FACT
Petitioners resided in Maryland when they filed their
On March 22, 2002, petitioners filed their delinquent
joint Federal income tax returns for tax years 1998, 1999, and
On June 8, 2007, respondent issued a notice of deficiency
On September 4, 2007, petitioners timely filed their
petitions in this Court for tax years 1998, 1999, and 2000.
notice mailed to petitioners reflects, among other adjustments, a
recharacterization of petitioners’ real estate transactions.
Specifically, respondent classified income from these
transactions as ordinary income from a trade or business rather
than royalty income, or capital gains as petitioners now claim.
Respondent made additional adjustments, some resulting from his
recharacterization of the income from real estate sales.
overall adjustments are as follows:
Schedule C: Income
Capital gain or loss
Self-employment tax deduction
Petitioners contend that they incorrectly reported proceeds
from sales of real estate as royalty income on their returns, and
they now argue that the proceeds should be capital gains.