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hand-copied the information from the original cards onto blank
cards that she subsequently presented to the Court as evidence
that the children lived with her during 1993 and 1994.
Petitioner reported her income for 1993 on a Form 1040.
Respondent received that return on July 20, 1994, almost 3 months
after it was due. On the Schedule C attached to her 1993 return,
petitioner reported business income in the amount of $1,856.22
and claimed Schedule C deductions in the amount of $23,411.65.
Petitioner reported her income for 1994 on a timely filed Form
1040. On the Schedule C attached to her 1994 return, petitioner
reported business income in the amount of $4,509 and claimed
Schedule C expenses in the amount of $22,518. Petitioner
completed Form 4822, Statement of Annual Estimated Personal and
Family Expenses (Form 4822), on which she listed total estimated
personal and family expenses for 1993 in the amount of $43,729.56
and total estimated personal and family expenses for 1994 in the
amount of $40,066.92.
Pam Ranew, a tax auditor with the Albany office of the
Internal Revenue Service, audited petitioner's 1993 and 1994
income tax returns. During the course of the audit, Ms. Ranew
reconstructed petitioner's income and expenses for both 1993 and
1994 by adding (1) petitioner's salary from teaching, (2) her
stated Schedule C income, and (3) her Federal and State tax
refunds. To reconstruct petitioner's expenses, Ms. Ranew added
(1) petitioner's Schedule C purchases and expenses, (2) expenses
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