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Respondent determined a deficiency in petitioners' Federal
income tax for 1999 in the amount of $2,540 and the accuracy-
related penalty under section 6662(a) in the amount of $508.
At trial, respondent conceded the accuracy-related penalty
under section 6662(a). The issues for decision are: (1) Whether
petitioners are entitled to dependency exemption deductions under
section 151 for the two children of petitioner Jackie L. Bouch's
prior marriage, and (2) whether petitioners are entitled to the
child tax credit under section 24.
Some of the facts were stipulated. Those facts, with the
exhibits annexed thereto, are so found and are made part hereof.
Petitioners' legal residence at the time the petition was filed
was Reno, Nevada.
Jackie L. Bouch (petitioner) was previously married to John
R. Harris. Two children were born of that marriage, James Harris
and Jack Harris. Petitioner and Mr. Harris were divorced on May
25, 1988. Petitioner thereafter married petitioner Jacob R.
Bouch, and the two filed a joint Federal income tax return for
1999. On that return, petitioners claimed the two children of
petitioner's prior marriage as dependents and claimed the child
tax credit under section 24 with the two children as qualifying
children. In the notice of deficiency, respondent disallowed the
dependency exemption deductions and the child tax credit.
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