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During the year in issue and through the time of trial,
petitioner had not adopted JM, had not married Mr. Martinez, and
was not related to JM. During the year in issue, JM was 11 years
old.
During taxable year 2002, petitioner was an independent
sales director for Mary Kay, Inc. Mary Kay, Inc. issued
petitioner a Form 1099-MISC, Miscellaneous Income, which
reflected “nonemployee compensation” of $25,765.25 and “other
income” of $3,758.81.
Also, during taxable year 2002, Mr. Martinez was disabled
and received disability benefits of approximately $420 per month.
Mr. Martinez did not file a Federal income tax return for taxable
year 2002.
On or about April 3, 2003, petitioner filed her Form 1040,
U.S. Individual Income Tax Return, for taxable year 2002.
Petitioner filed her 2002 Federal income tax return as a head-of-
household and claimed dependency exemption deductions for AM and
JM. Petitioner also claimed an earned income credit with AM and
JM as the qualifying children.
On March 18, 2004, respondent issued a notice of deficiency
denying petitioner (1) the claimed dependency exemption deduction
with respect to JM, and (2) the portion of the claimed earned
income credit with JM as the qualifying child.
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Last modified: May 25, 2011