Gary L. and Jolene K. Pendleton - Page 4

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          night with Jolene and their daughters Amanda and Danielle.                  
          During 1997, petitioners were trying to determine whether they              
          were going to remain married.  At the time each petitioner                  
          elected relief under section 6015, petitioners were divorced.               
               Gary testified that Jolene kept the books and records of his           
          endeavors.  Gary provided the expense estimates to Jolene.  Both            
          petitioners had access to their bank accounts and bank                      
          statements.  Both petitioners deposited and withdrew money from             
          the bank accounts.  Both petitioners were responsible for the               
          preparation of the 1996 and 1997 Federal income tax returns and             
          both reviewed the returns.                                                  
               Although Jolene disputed some of Gary’s statements, we found           
          Gary to be a credible witness.  Our evaluation of his testimony             
          is founded upon “the ultimate task of a trier of the facts-–the             
          distillation of truth from falsehood which is the daily grist of            
          judicial life.”  Diaz v. Commissioner, 58 T.C. 560, 564 (1972).             
               On their 1996 joint income tax return, petitioners deducted            
          $22,260 of expenses on Schedule A, Itemized Deductions, which               
          included $13,471 of job expenses, and $20,886 of expenses on                
          Schedule C, Profit or Loss From Business.  On their 1997 joint              
          income tax return, they deducted $13,064 of expenses on Schedule            
          A and $19,115 of expenses on Schedule C.  For 1996, respondent              
          disallowed $13,471 of the Schedule A deductions and $20,886 of              
          the Schedule C deductions.  For 1997, respondent disallowed $379            

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