Gregg Chernik - Page 5




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               During 1994, petitioner also received a distribution of                
          $40,635 from the California Public Employees' Retirement System             
          (CALPERS).  This amount consisted of $23,192 in tax-deferred                
          contributions and $17,444 of interest.  Federal income taxes of             
          $8,127 were withheld from the distribution.                                 
               Sometime prior to August 1995, petitioner was convicted of a           
          crime and incarcerated.  While he was in prison, petitioner                 
          prepared and filed his 1994 Form 1040A, U.S. Individual Income              
          Tax Return.  Because of his incarceration, petitioner was unable            
          to consult his tax records and had to estimate his gross income.            
          On his 1994 return, petitioner reported gross income of $48,280             
          (wages of $48,000 and interest income of $280).  After                      
          subtracting the standard deduction and dependency exemptions                
          claimed, petitioner reported taxable income of $37,330.                     
               Petitioner made a mathematical error on the return which               
          subsequently was corrected, decreasing petitioner's taxable                 
          income by $2,000 to $35,330.                                                
               In his notice of deficiency, respondent listed the income              
          paid to petitioner during 1994 as reported on information returns           
          filed by third-party payors, stated that he could not match                 
          income from the information returns to petitioner's 1994 Federal            
          income tax return, and determined that petitioner had failed to             
          report his CALPERS distribution and some cancellation of                    
          indebtedness income.  Respondent has now conceded that                      





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