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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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