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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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