Maria E. Magallon - Page 4

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          slot machines.  Jackson Rancheria issued to petitioner for 2002,            
          eight Forms W-2G, Certain Gambling Winnings, showing that                   
          petitioner had total gross winnings of $35,355.                             
               Petitioner filed for 2002 Form 1040, U.S. Individual Income            
          Tax Return, reporting wages of $3,003.  Petitioner also reported            
          gambling winnings of $35,355 against which she claimed Schedule A           
          gambling loss deductions of $35,233.  On Schedule C, Profit or              
          Loss From Business, petitioner reported income of $6,992 derived            
          from gross receipts of $20,305 from her flea market sales.                  
          Petitioner claimed Schedule C deductions of $1,460 for taxes and            
          licenses expenses, a dependency exemption deduction for MA, and a           
          child tax credit of $34.2                                                   
               Petitioner’s return was examined by Tax Compliance Officer             
          George Martin (TCO Martin).  During the examination, petitioner             
          provided to TCO Martin:  (1) A Form 4822, Statement of Annual               
          Estimated Personal and Family Expenses, indicating that her                 
          personal expenses totaled $10,826, (2) an annual activity report            
          from Jackson Rancheria substantiating that petitioner had net               
          gambling losses of $28,183.15 in 2002, (3) a calendar showing the           
          daily amount of income from her flea market sales, and (4) other            
          miscellaneous documentation.                                                

               2The correct computation of the child tax credit will be               
          determined by the Court’s resolution of the dependency exemption            
          deduction issue.                                                            

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