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Windi, in addition to working for K & A, also worked at an
IGA grocery store from January 1995 to November 1995, earning
between $120 and $130 per week. Windi used her earnings for
personal expenses.
Petitioner received assistance from Federal and State
agencies during the taxable years in issue. The assistance
included food stamps for the entire taxable year 1994 and for 3
to 4 months during the taxable year 1995. Petitioner received
monthly food stamp benefits in the amount of $212 ($2,544 per
year). Petitioner, Mr. Gorges, and Windi were also covered under
Medicaid during the taxable years in issue.
Petitioner claimed Mr. Gorges and Windi as dependents on her
returns for the years 1994 and 1995, and claimed head-of-
household filing status for each of those taxable years.
3. Respondent's Adjustments for the Taxable Years 1994 and 1995
and Reconstruction of Petitioner's Income for the Taxable
Year 1994
Upon examination, respondent disallowed the cost of goods
sold claimed by petitioner on Schedules C of her 1994 and 1995
returns. Respondent also disallowed the claimed dependency
exemptions for each of the taxable years in issue and determined
that petitioner was not entitled to claim head-of-household
filing status.
In addition to these adjustments, respondent reconstructed
petitioner's income for the taxable year 1994 by using the source
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