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During 1997, petitioner maintained a checking account at
NationsBank (the checking account). The checking account was not
a joint account. He deposited some of his earnings from AAA into
the checking account. During 1997, total deposits of $18,087
were made to the checking account as set forth in Appendix II.
During 1997, Mrs. Quintero was employed part-time as a
housekeeper. She earned wages of $10,237 from this position, as
reflected on a Form W-2 issued to her by her employer.
AAA issued a Form 1099-MISC, Miscellaneous Income, reporting
nonemployee compensation earned by petitioner during 1997 in the
amount of $23,552. AAA’s accountant prepared the Form 1099-MISC
based on information contained on AAA’s monthly payroll sheets.
Petitioners’ 1997 return was prepared by H&R Block Eastern
Tax Service Inc. The return lists Mrs. Quintero’s occupation as
“housekeeping” and petitioner’s as “unemployed”. The only income
reported on petitioners’ 1997 return is the income earned by Mrs.
Quintero. There is no income tax liability (either under section
1 or section 1401) reported on the return. A refund of $3,656
attributable entirely to a section 32 earned income credit is
claimed on the return.
In the notice of deficiency, respondent, relying upon the
Form 1099-MISC issued to petitioner by AAA, increased
petitioners’ income by $23,552. Respondent further determined
that the compensation that petitioner received from AAA
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