Fred L. Baker and Lisa A. Powers - Page 2

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                                  FINDINGS OF FACT                                    

               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and supplemental stipulation of facts              
          are incorporated herein by this reference.  At the time the                 
          petition was filed, petitioners resided in New Milford,                     
          Connecticut.                                                                
               Petitioner was a practicing attorney during the relevant               
          period.  Petitioners timely filed their 1990 Federal income tax             
          return using the cash receipts and disbursements method of                  
          accounting.                                                                 
               Prior to June 29, 1987, Raymond Staron held an option to               
          purchase commercial property located at 1835 Post Road East in              
          Westport, Connecticut, for which he had paid $100,000.                      
          Hereinafter, 1835 Post Road East will be referred to as the                 
          property.  The property consisted of approximately one-half acre            
          with four separate buildings.  Raymond Staron sought out others             
          who would be willing to invest in the property.  On June 29,                
          1987, petitioner, Bernard Staron, George Allingham, and Raymond             
          Staron purchased the property for $1.2 million.  They acquired              
          title to the property as tenants in common.  The purchasers                 
          financed 100 percent of the purchase price with a $1.2 million              
          loan from Citytrust.  Each of the individual purchasers signed a            
          note and mortgage on the property for the $1.2 million loan.                







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