-7-
1994. They reported that Medi-Task had gross receipts and gross
income of $147,782, total expenses of $117,588, and net profit of
$30,194. Petitioners underreported 1994 gross receipts for Medi-
Task by $22,601 and did not deduct $2,050 of Medi-Task expenses.
They reported that they had no income from the cabins and $27,724
in expenses. Hawthorne examined parts of the 1994 return, such
as the children’s names and Social Security numbers and child
care credits, but otherwise accepted the return that Charlton
prepared.
E. The Divorce
Petitioners separated in 1995, after they filed their 1994
return, and were divorced in 1996. Under the divorce settlement,
Charlton received the rental cabin property and Hawthorne
received Medi-Task. As required by the divorce settlement,
Charlton deposited petitioners’ 1994 refund check for $4,453 in a
joint bank account at Texas Bank in Burnet, Texas, on June 2,
1995. Charlton used some of the 1994 refund to pay his personal
expenses.
OPINION
A. Whether All Medi-Task Income Is Attributable to Hawthorne
for Self-Employment Tax Purposes
Charlton contends that the Medi-Task income should be
divided equally between him and Hawthorne for self-employment tax
purposes. Respondent and Hawthorne contend that all of the Medi-
Task income is attributable to Hawthorne and that the self-
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