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inmate at a penal institution, is entitled to an earned income
credit for taxable year 1998.
Background
Petitioner was incarcerated at the Federal Correctional
Institution in Dublin, California, throughout the taxable year
1998. While she was an inmate, petitioner was employed by
Unicor-Federal Prison Industries. For her services, petitioner
earned wages of $1,658.48 in 1998.
Petitioner reported these wages on her 1998 Federal income
tax return. She reported no other income for 1998. Petitioner
claimed the standard deduction of $6,950 and, consequently,
reported no tax liability for 1998. Petitioner claimed an earned
income credit of $128 on her 1998 return and sought a refund in
that amount.
On December 10, 1999, respondent issued a notice of
deficiency to petitioner with respect to petitioner’s 1998 tax
return. In the notice of deficiency, respondent disallowed
petitioner’s claimed earned income credit and determined a
deficiency in the amount of $128. The notice of deficiency
includes a statement that amounts paid to inmates in penal
institutions for their work are not earned income for purposes of
computing the earned income credit.
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