George A. and Hilda Quintero - Page 5

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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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