Unknown Padding on Containing Element

There is what appears to be a 2px bottom padding on the image to the containing element. I am able to resolve this by removing the z-index. I need the z-index arrangement however to开发者_运维问答 provide an inset box shadow on the image.

It can be seen here: http://jsfiddle.net/JkLAP/

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just add .photo{display:block}

demo: http://jsfiddle.net/JkLAP/2/