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Ms. Chester, who testified that not only was petitioner aware of
the distributions, but petitioner in fact urged her to withdraw
funds from her retirement account in order to pay the couple's
expenses, including tuition for petitioner's postgraduate
education and a downpayment on petitioner's car, while he was
attending the university. Ms. Chester also testified that
petitioner was responsible for organizing the couple's tax
records and presenting them to their accountant for the
preparation of the 1996 joint return. Respondent also presented
certain other documentary evidence, such as records of the joint
bank account held by petitioner and Ms. Chester, to establish
that petitioner was aware of the taxable distributions.
In Diaz v. Commissioner, 58 T.C. 560, 562 (1972), we
observed that the process of distilling truth from the testimony
of witnesses, whose demeanor we observe and whose credibility we
evaluate, is the daily grist of judicial life.
At trial we had the opportunity to observe both petitioner
and Ms. Chester and to evaluate their demeanor as witnesses. We
found Ms. Chester to be a credible and earnest witness, and we
are satisfied that her testimony was truthful. We regret to say
that we were not impressed with petitioner's demeanor. We reject
petitioner's testimony because we do not believe it and because
it is contradicted by the record. After considering the
testimony and documentary evidence presented, and in light of
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