Thomas A. v. Commissioner of Internal Revenue, 080509 FEDTAX, 29866-07S

Docket Nº:29866-07S.
Opinion Judge:DEAN, Special Trial Judge
Party Name:THOMAS A. AND VERNESTER O. JOHNSON, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Thomas A. Johnson and Vernester O. Johnson, pro sese. Matthew D. Carlson, for respondent.
Case Date:August 05, 2009
Court:United States Tax Court
 
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T.C. Summary Opinion 2009-124

THOMAS A. AND VERNESTER O. JOHNSON, Petitioners

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 29866-07S.

United States Tax Court

August 5, 2009

NOT PRECEDENTIAL

Thomas A. Johnson and Vernester O. Johnson, pro sese.

Matthew D. Carlson, for respondent.

DEAN, Special Trial Judge:

This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect when the petition was filed. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. Unless otherwise indicated, subsequent 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.

Respondent determined for 2005 a deficiency in petitioners' Federal income tax of $8,134 and an accuracy-related penalty under section 6662(a) of $1,626.80.

The parties agree that $5,000 of petitioner Vernester O. Johnson's income reported on Form 1099-MISC, Miscellaneous Income, from "Red Gum TIC" is properly reportable on Schedule C, Profit or Loss From Business, rather than as "Wages, salaries, tips, etc." on line 7 of petitioners' return. The issues remaining for decision1 are whether petitioners are: (1) Entitled to a home mortgage interest deduction; (2) entitled to deduct expenses for supplies and legal and professional services on Schedule C; (3) entitled to charitable contribution deductions; and (4) liable for the accuracy-related penalty under section 6662(a).

Background

Some of the facts have been stipulated and are so found. The stipulation of facts and the exhibits received in evidence are incorporated herein by reference. Petitioners resided in California when the petition was filed.

In January 1998 Maury and Pelipa Power, one-third joint tenants, Trenton and Elvia Shultz, one-third joint tenants, and Roman Hernandez and Refugio Perez, one-third joint tenants, granted a deed to property (property) to Diversified Unlimited, Inc., doing business as United Investments (Diversified). Diversified purchased the property subject to a "First note and deed of trust" in favor of Knutson Mortgage Corp. (Knutson) securing a note of $192,758.62.

In January 1998 petitioners entered into an executory contract for the purchase of the property from Diversified. In February 1998 the parties entered into an agreement for the sale of real property by Diversified. According to the latter agreement, petitioners agreed to purchase the property subject to the first note and deed of trust in favor of Knutson. Petitioners also agreed to pay Diversified $15,000 by June 15, 1998. Attached to the sale contract is an affidavit in which petitioners acknowledge "their awareness" that: (a) They are purchasing the property subject to the encumbrance; (b) that Diversified asks that petitioners assume the loan or refinance the property after a 6-month period had expired; and (c) they will be the "owner of title on record" of the property. Diversified subsequently issued to petitioners a "CORPORATION GRANT DEED", and petitioners issued to Diversified a deed of trust to secure a promissory note for $10,000 in favor of Diversified.

The property was used as petitioners' primary residence. Petitioners provided as evidence of interest payments copies of cashier's checks drawn on Washington Mutual Bank (WaMu) to "Countrywide" or "Countrywide Home Loans": (a) For $8,709.23 dated February 3, 2005, bearing the handwritten notation "OCT, NOV, DEC, JAN, F [illegible]" (the space showing the remitter is blank); (b) for...

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