Lisa B. Williams - Page 11

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          Mr. Williams’s joint 1993 and 1994 income tax returns reflect the           
          reporting of gross income in the amounts of $65,520 and $96,228,            
          respectively.  There is no mention on those returns of the                  
          $25,000 or $35,000 payment received by petitioner from the                  
          corporation during 1993 or 1994.  Twenty-five percent of the                
          income reported for 1993 and 1994 is $16,380 and $24,057,                   
          respectively.  Therefore, the $25,000 and $35,000 bonuses, which            
          were includable in and omitted from gross income for 1993 and               
          1994, respectively, were in excess of 25 percent of the gross               
          income reported for each year within the meaning of section                 
          6501(e).  Accordingly, we hold that the period for assessment had           
          not expired for 1993 and 1994 on April 13, 1999, the date                   
          respondent mailed the notice of deficiency to petitioner and Mr.            
               The third issue presented for our consideration involves               
          respondent’s determination that, for 1995, petitioner and Mr.               
          Williams had incorrectly reported as wages a premature withdrawal           
          of $1,300 from a pension account that was subject to the 10-                
          percent penalty under section 72(t).  Respondent determined that            
          the $1,300 should be removed from income in the wage category and           
          included in income in the pension category.  Those adjustments              
          cancel each other out and do not result in an increase in the               
          gross income of petitioner and Mr. Williams.  Changing the                  
          category of the $1,300, however, resulted in a $130 (10-percent             

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