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684-0-18497 (the joint checking account).10 Some of the funds
deposited into WPA’s bank account were subsequently transferred
via checks to the joint checking account. Petitioners used the
funds in their joint checking account to pay for their living
expenses.
In 1995, Mr. Sowards wrote 39 checks totaling $12,995 from
WPA’s bank account to Ms. Sowards. In 1996, Mr. Sowards wrote 59
checks totaling $17,538 from WPA’s bank account to Ms. Sowards.
In 1997, Mr. Sowards wrote 28 checks totaling $12,047.20 from
WPA’s bank account to Ms. Sowards. Ms. Sowards deposited the
aforementioned checks into the joint checking account. In 1997,
petitioners borrowed $30,000 from a third-party lender. Part of
the loan proceeds was deposited into the joint checking account
and used to pay, inter alia, credit card bills and home
improvement expenses.11
On their 1996 return, petitioners included a Schedule C,
Profit or Loss From Business, for “business consulting” that Ms.
Sowards allegedly operated. Respondent denied all the expenses
associated with this business for lack of substantiation. During
respondent’s examination, Revenue Agent Terry Daleiden (Agent
Daleiden) questioned Mr. Sowards about this business and these
10Wells Fargo bank took over First Interstate Bank, and
petitioners’ account number changed to 0515-660033.
11On Apr. 16, 1997, $13,000 of the loan proceeds was also
deposited into WPA’s bank account.
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