Michael and Penny Rhodes - Page 3

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          The decision to be entered is not reviewable by any other court,            
          and this opinion should not be cited as authority.                          
               Respondent determined the following deficiencies in Federal            
          income taxes and the penalties for fraud under section 6663(a):             

               Year           Deficiency               Sec. 6663(a)                   
               1994           $3,360                   $2,520                         
               1995           2,623                    1,967                          

               The issues for decision are:  (1) Whether petitioners are              
          entitled to deduct on Schedules C, Profit or Loss From Business,            
          losses in the amounts of $19,738.50 and $17,125.39, respectively,           
          for 1994 and 1995, and (2) whether petitioner wife Penny Rhodes             
          (Ms. Rhodes) is liable for section 6663(a) penalties for fraud              
          with respect to the joint 1994 and 1995 Federal income tax                  
          returns of her and her spouse.                                              
               Some of the facts were stipulated.  Those facts, with the              
          annexed exhibits, are so found and are incorporated herein by               
          reference.  Petitioners’ legal residence at the time the petition           
          was filed was Garrett, Indiana.                                             
               During the years at issue, petitioners lived and worked in             
          Garrett, Indiana.  Petitioner husband (Mr. Rhodes) was a railroad           
          brakeman and conductor for CSX Transportation, Inc., during the             
          years at issue.  Beginning in 1993 and during the years at issue,           
          Ms. Rhodes operated Keepsake Designer Creations (Keepsake), a               

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