Charles A. Ballard - Page 10

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                    Advertising and                                                   
                   promotion           ---       4,435                               
                    Professional fees   ---          3,422                            
               Income (loss)         ($73,689)    ($134,111)                          
               Barry M. Strauss (Strauss), the managing principal of                  
          Barry M. Strauss Associates, Ltd. (Associates), is a tax attorney           
          and C.P.A. specializing in advising investment bankers in                   
          accounting, tax, and financial matters.  Ballard Marine’s Federal           
          income tax returns for 1986 and 1987 were prepared by an employee           
          of Associates.                                                              
          Petitioner’s Tax Returns                                                    
               Petitioner made returns of income for 1986 and 1987 on                 
          Forms 1040, U.S. Individual Income Tax Return.  On those forms,             
          petitioner reported losses from Ballard Marine in the amounts of            
          $73,689 and $134,111, respectively.                                         
               Petitioner’s Federal income tax returns for 1986 and 1987              
          were prepared by an employee of Associates.                                 
               Strauss had come to represent petitioner in 1984, when the             
          firm retained Associates to either prepare or review the tax                
          returns of managing directors to assure that all tax matters were           
          properly reported by them.  Associates was so retained in order             
          to avoid having the firm embarrassed either by the Securities and           
          Exchange Commission or the general media on account of the tax              
          problems of managing directors.                                             
          Not an Activity Engaged In for Profit                                       
               Ballard Marine’s activity of holding the yacht for charter             
          was not an activity engaged in for profit.                                  




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