Charles A. Ballard - Page 2

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                       MEMORANDUM FINDINGS OF FACT AND OPINION                        
               HALPERN, Judge:  By notice of deficiency dated March 17,               
          1994, respondent determined deficiencies and additions to tax               
          against petitioner as follows:                                              
                                        Additions to Tax                              
                                   Sec.           Sec.     Sec.                       
          Year Deficiency   6653(a)(1)(A)  6653(a)(1)(B)   6661                       
          1986  $32,153        $1,608          1            ---                       
          1987   53,585            2,679          1         $13,396                   
                1 50 percent of interest due on deficiency amount.                    
               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
               After concessions by the parties, the issues remaining for             
          decision are:  (1) Whether petitioner may deduct losses incurred            
          by his wholly owned S corporation, Ballard Marine, Inc. (Ballard            
          Marine), in its operation of its yacht chartering business, or              
          whether such deductions are nondeductible because they were                 
          incurred in an activity not engaged in for profit within the                
          meaning of section 183(a), and (2) whether petitioner is liable             
          for the additions to tax determined by respondent.                          
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulations of fact filed by the parties and attached                  
          exhibits are incorporated herein by this reference.                         

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