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petitioner’s return. The $10,537 adjusted gross income reported
on her return takes into account the above items of income and
the loss reported on the Schedule C.
A personal exemption deduction, a dependency exemption
deduction for an individual not listed on the return, and the
standard deduction applicable to a head of household are
subtracted from the adjusted gross income and result in reported
taxable income of $2,237. Applying the section 1 income tax rate
applicable to a head of household, petitioner’s spouse reported
an income tax liability of $336, which was reduced to zero by a
claimed credit for child and dependent care expenses. The $1,344
refund claimed on the return consists of an $804 earned income
credit, plus $540 of Federal income tax withholdings.
Petitioner’s 1988 Federal income tax return was examined.
As a result, respondent issued a notice of deficiency in which a
deficiency of $8,118 in petitioner’s 1988 Federal income tax was
determined. It appears that the deficiency results from the
disallowances of the earned income credit and the deductions
claimed on the Schedules C. The details of the examination and
deficiency determination cannot be determined with precision
because respondent’s administrative file has been destroyed.3
3 According to respondent, the file was destroyed “in the
ordinary course of business”. We interpret this to mean that the
destruction of the file was consistent with respondent’s record
retention requirements. In any event, petitioner does not claim
that the file was destroyed for other reasons.
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