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of $4,180.69, interest income of $206.31, and unemployment income
of $2,533. They claimed a child care credit of $81 and showed a
tax liability of zero. They also claimed (and apparently
received as a refund) an earned income credit in the amount of
$851. Petitioners claimed two children as dependents, Sean D.
Ferry and Brent R. Ferry. On line 6(c)(3), requesting the
children's Social Security numbers, petitioners stated, "applied
for".
On their joint Federal income tax return for 1988
petitioners reported wages of $5,665.10, interest of $63.80, and
unemployment income of $4,920 for a total of $10,648.90. They
claimed and received as a refund an earned income credit of $793.
Again, they listed the children as dependents and showed their
Social Security numbers as "applied for".
Forms W-2 were attached to the returns. The Forms W-2 for
Donald D. Ferry showed wages from Wayanne, 1108 South College
Avenue, Newark, Delaware 19713, in the amount of $3,910.69 in
1987 and $5,665.10 in 1988. These forms were prepared by
petitioner himself, not by Wayanne's normal payroll preparer, and
petitioner's business associate, Wayne Wilberding, was not aware
of them.
Using a combination of the bank deposits and specific items
methods, respondent originally determined that petitioners
understated their income for 1987 by $130,232 and for 1988 in the
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