Penny J. Sutherland - Page 3




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               During the year in issue, petitioner was employed by Wesley            
          Health Care Center, Inc., in Saratoga Springs, New York.  She               
          electronically filed her 1997 Federal income tax return on April 15,        
          1998, reporting wage income of $11,375.  She reported her filing            
          status as single and claimed dependency exemptions for Christina and        
          Mitchell, identifying them as “qualifying children” for purposes of         
          claiming a $3,656 earned income credit. (For purposes of claiming           
          this credit, petitioner’s modified adjusted gross income for 1997           
          was $11,375.)                                                               
               On his 1997 Federal income tax return, Mr. Pancake claimed an          
          earned income credit for Alyssa.  For purposes of claiming this             
          credit, Mr. Pancake’s 1997 modified adjusted gross income was higher        
          than petitioner’s. (Mr. Pancake identified neither Christina nor            
          Mitchell as his qualifying children for purposes of claiming this           
          credit on his return.)                                                      
               Respondent disallowed the earned income credit petitioner              
          claimed on her 1997 return, explaining in the notice of deficiency:         
               All the children qualify both Penny and John for the                   
               earned income credit.  Mitchell and Christina qualify as               
               foster children for John.  They do not have to be related              
               to him to be qualifying children.  They lived as a family              
               in the same home the entire year and therefore are his                 
               qualifying children for the earned income credit.                      
               Because Penny’s income is not the highest, we have not                 
               allowed her earned income credit.                                      
               John may amend his return to list two qualifying children              
               for the earned income credit is [sic] he wishes.                       








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