Lisa B. Williams - Page 5

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          her base salary.  The Forms W-2, however, did not include the               
          amount of the bonus that she had received during the taxable                
          year.  Petitioner did not receive a separate Form W-2 or Form               
          1099 from the corporation with respect to the bonus amounts she             
          received during 1993, 1994, or 1995.  The corporation did not               
          withhold income or employment taxes from petitioner’s bonus                 
          checks.  The corporation deducted petitioner’s bonus checks as              
          salary expense.                                                             
               Petitioner received each year’s bonus in the form of a                 
          single check, and she negotiated it by endorsement and depositing           
          into her bank account.  Two of the three checks contained the               
          explanation on its face that it was being paid as a “bonus”.  In            
          the process of employee evaluation, each employee discussed the             
          salary adjustments and/or bonuses with an immediate supervisor              
          and the bonus checks were provided in a sealed envelope, the                
          contents of which was usually known only by Dr. Deland.                     
          Petitioner was not aware of the amount of any other employee’s              
          bonus for the 3 years in question.                                          
               Petitioner was married to Jeffrey W. Williams, and they                
          filed joint Federal income tax returns for their 1993, 1994, and            
          1995 tax years.  The joint Federal income tax return filed by               
          petitioner and her husband for 1993 was prepared by a commercial            
          return preparer.  For 1994 and 1995, however, petitioner’s                  
          husband prepared their joint Federal income tax returns.                    

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Last modified: May 25, 2011