Debra D. McNair - Page 4

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          returns contained numerous errors and claims for deductions to              
          which she clearly was not entitled.  Petitioner generally blamed            
          her tax return preparer for the mistakes.  She stated repeatedly            
          during her testimony that she provided her tax return preparer              
          with her tax documentation and other requested information, but             
          that she was not given the opportunity to review her returns                
          before the tax return preparer filed them electronically.  She              
          testified that she did not know of the inaccuracies in her                  
          returns until they were selected for examination.  During the               
          examination of her returns, petitioner submitted a Form 1040X,              
          Amended U.S. Individual Income Tax Return for 1999, marked “For             
          Information Only Do Not Process,” with unsigned draft Forms 1040,           
          Individual Income Tax Return, marked “Amended” for 1999 and 2000.           
          None of these amended forms were filed.  These draft documents              
          were prepared by Sherwin Clark (Clark), to whom petitioner gave a           
          power of attorney to represent her before the Internal Revenue              
          Service.  As explained further herein, these draft returns were             
          used by petitioner and her representative in their administrative           
          negotiations with respondent and in explaining concessions.                 
          A.  Dependency Exemption Deductions and Child Tax Credits                   
               Petitioner was unmarried during the years in issue and filed           
          her tax returns as head of household.  Petitioner claimed                   
          dependency exemption deductions for her mother and three children           
          (the children) who were not her biological children.  Two of the            

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