Ramiro and Maria Martinez - Page 5

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          workers, but he could identify only one worker, Mr. Luis Garcia.            
          Mr. Martinez estimated that he kept $1,400 of the $3,000.                   
               3.   Alpa Construction and Svetella Design, Inc.                       
               Mr. Martinez testified he split both the $5,020 he received            
          from Alpa Construction (Alpa) and the $3,750 he received from               
          Svetella Design, Inc. (Svetella), with three or four workers whom           
          he could not identify.  Petitioner did not know how much of the             
          Alpa income he kept, but he estimated that he kept $1,600 of the            
          Svetella income.                                                            
               4.   Tax Return Preparation                                            
               Petitioners’ 2001 joint return was prepared by Gonzales                
          Services.  Mr. Martinez informed Gonzales Services that he                  
          divided the income he received with other workers.  The amount of           
          income Mr. Martinez reported on his Schedule C-EZ was based on              
          his own estimates of how much he had earned from his business and           
          how much he had paid to others.  Mr. Martinez’s estimates were              
          not based on any records.                                                   
          D.   Mrs. Martinez’s Self-Employment Income                                 
               In 2001, Fresh Paint Art Advisor, Inc., paid Mrs. Martinez             
          $3,790, and that was the only income reported on her Schedule C-            
          EZ.  Also during 2001, Los Angeles County (County) paid Mrs.                
          Martinez $3,150 for providing care to her grandchildren.  Mrs.              
          Martinez used the money from the County for her grandchildren,              
          but she kept no records of her expenditures.                                

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