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of North Carolina (Bankruptcy Court) entered judgments (bank-
ruptcy judgments) in excess of $3 million against petitioner and
Mr. Butner. As of the time of the trial in this case, those
judgments had not been satisfied.
In December 2002, Mr. Butner was incarcerated in connection
with bankruptcy fraud charges, and on November 22, 2004, he was
released from prison.
As described in detail below, petitioner and Mr. Butner
filed jointly a Federal income tax (income tax) return for each
of the taxable years 1994, 1995, 1998, and 1999. In each of
those returns, they showed petitioner’s occupation as “home-
maker”.
On January 20, 1998, petitioner and Mr. Butner signed Form
1040, U.S. Individual Income Tax Return, for the taxable year
1994 (1994 Form 1040). At the time petitioner signed that form,
she was aware that the bankruptcy judgments had been entered
against Mr. Butner and herself and had not been satisfied. On
January 20, 1999, petitioner and Mr. Butner filed late their 1994
Form 1040. In that form, petitioner and Mr. Butner reported
self-employment tax owed of $10,054, income tax withheld of $92,
and a total amount owed of $10,474, which included an estimated
tax penalty owed of $512.
On May 24, 1999, an assessment of self-employment tax of
$10,054 was made for the taxable year 1994, against which was
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