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that Delaware Corporation paid during 1995. In Ms. Havens’s 1995
return, Ms. Havens did not report as income Delaware Corpora-
tion’s assignment of its interest in the Virginia Beach property
contract to her.
Mr. Barber’s Returns
Mr. Barber filed Form 1040 for his taxable year 1994 (Mr.
Barber’s 1994 return). A preparer prepared that return.9 In Mr.
Barber’s 1994 return, Mr. Barber did not report as income the
following payments that Delaware Corporation made during 1994:
(1) $17,807 for legal fees with respect to the Mitchums Creek
property and (2) $7,762 for the 1994 child care expenses.
Mr. Barber filed Form 1040 for his taxable year 1995 (Mr.
Barber’s 1995 return). Failes & Associates, P.C., was the
preparer of that return. In Mr. Barber’s 1995 return, Mr. Barber
did not report as income $3,321 for the 1995 child care expenses
that Delaware Corporation paid during 1995.
Respondent’s Examination of Petitioners’ Respective Returns
Respondent’s examination of petitioners’ respective returns
for the taxable years in question began prior to July 23, 1998.
Delaware Corporation’s Notice of Deficiency
Respondent issued a notice to Delaware Corporation (Delaware
Corporation’s notice) with respect to its taxable years 1994 and
9The record does not disclose the identity of the preparer
of Mr. Barber’s 1994 return.
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