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penalties for negligence for an underpayment equal to the entire
amount of the deficiency for each year in issue.
The first issue for decision is whether petitioner is
entitled to earned income credits. An earned income credit is
allowed to an eligible taxpayer under section 32(a) in an amount
based upon a percentage of the taxpayer’s earned income. Earned
income is defined under section 32(c)(2) to include the amount of
the taxpayer’s net earnings from self-employment.
Respondent argues that petitioner is not entitled to the
earned income credit for a number of reasons. One reason, the
only one we need discuss, is that petitioner had no earned income
during the years in issue.1 We agree with respondent.
Petitioner testified that during the years in issue, she and her
sister were tailors, performing work in their house. On
petitioner’s tax returns for the years in issue, she reported
$5,723, $6,783, and $7,016 in income on Schedules C-EZ, Net
Profit From Business. No business expenses were claimed as
deductions in any year. No business name or other information
was provided for any of the years, aside from the notation “self
employed” as a description of the principal business. In 1995
and 1996, the “principal business code” was not provided on the
form. In 1997, however, petitioner reported the code as “2659”.
1Respondent argues in his memorandum filed at trial that the
only evidence shown to respondent that petitioner earned income
was a picture of petitioner at a sewing machine.
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