This is a Form 5278 for a refund litigation case. Form 5278 is Schedule 1. The Form 5278 shows a decrease to Schedule E expenses of $3,200.00 on line 7a of Form 5278. The revised tax liability on line 18 is $6,414,00. This is compared to the amount on line 19 (Total tax shown on return or as previously adjusted) of $7,583.00 to get a decrease in tax of $1,169.00 shown on lines 21 and 23. Line 24 of Form 5278 shows there is a decrease in the IRC 6662(a) penalty of $234.00 and says to see Schedule 2. Below the penalty amount is a computation of the Total tax shown on return or as previously adjusted amount of $7,583.00. This is the tax on the original return of $3,109.00 plus the assessment of the notice of deficiency amount of $4,474.00. This results in the total of $7,583.00.
