Anthony and Linda Walters - Page 3

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          petitioners resided in Baltimore, Maryland.  Petitioners timely             
          filed joint Federal income tax returns for taxable years 1987,              
          1988, and 1989.  All references to petitioner are to Anthony                
          Walters.                                                                    
               During the years at issue, petitioner and his brother,                 
          Carlton Walters (Carlton), were partners in a Maryland general              
          partnership located in Baltimore County, Maryland.  The                     
          partnership operated a store under the name of Fruitland Produce            
          (Fruitland) and sold fresh produce and seafood to its customers.            
          During the winter holiday season, Fruitland also sold Christmas             
          trees.                                                                      
               Both petitioner and Carlton grew up in the produce business.           
          At age 16, petitioner quit school in order to work in his                   
          father's produce store.  Similarly, Carlton dropped out of school           
          while in the 11th grade and began working in his father's produce           
          store.  In approximately 1968, petitioner formed Fruitland as a             
          sole proprietorship.  Sometime thereafter, petitioner and Carlton           
          united and began operating Fruitland as an equal partnership.               
          From its inception, the partnership has been based upon oral                
          agreements and has always been operated on a cash basis.  Early             
          on, petitioner and Carlton agreed that Fruitland's interests                
          would be best served if petitioner controlled the partnership's             
          financial affairs.  This arrangement was in response to Carlton's           
          affinity for gambling and remained in effect throughout the years           
          at issue.                                                                   




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