Bernard Michael Reed - Page 3

               In 1990, petitioner formed NSA, and, according to his                  
          testimony, began looking for real estate investments.  In 1991,             
          petitioner passed his real estate agent examination and                     
          associated NSA with Marilyn Taylor, a real estate broker.                   
          Petitioner did not invest in, sell, or renovate any real estate             
          during 1991.  On November 8, 1991, while on disability leave from           
          Whittlesea Cabs and receiving worker's compensation, petitioner             
          traveled to Alaska for the purported purpose of investing in real           
               From November 12 until November 19, 1991, petitioner stayed            
          at the Best Western Hotel in Juneau, Alaska.  On November 26,               
          petitioner entered into a 6-month lease with Patrick Macksey as             
          co-tenant for a three-bedroom house at a monthly rent of $1,100.            
          Under the terms of the lease, petitioner agreed not to paint,               
          paper, or otherwise redecorate or make alterations to the                   
          premises without prior written consent of the owner.  The initial           
          payment, including security deposit and first month's rent, was             
               Due to a lack of available treatment for his ongoing medical           
          problems, petitioner departed Alaska on December 24 and returned            
          to Nevada on or about December 27, 1991.  Petitioner did not                
          invest in any real estate or attend any business meetings with              
          bankers or realtors while in Alaska.                                        
               On Schedule C attached to his 1991 Federal income tax                  
          return, petitioner claimed the following business deductions:               

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