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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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