Michael H. Stough & Barbara M. Stough v. Commissioner

Ruwe, Judge:

Respondent determined a $300,332 deficiency in petitioners’ 2008 Federal income tax and a $58,117.20 accuracy-related penalty under section 6662(a). On one of their 2008 Schedules E, Supplemental Income and Loss, petitioners reported as rents received a $1 million payment from Talecris Plasma Resources, Inc. (Talecris). Petitioners then claimed an offsetting $1 million Schedule E “contribution to construct” deduction (Schedule E deduction). Upon examination respondent disallowed the $1 million Schedule E deduction but increased petitioners’ basis in the subject rental property and…