Joseph L. Barnhill, Jr. and Cynthia A. Barnhill - Page 3

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          Business      Partnership         Adjusted                                  
          Year         Income         Losses          Gross Income                    
          1980        $ 80,034       $(197,975)        $(117,849)                     
          1981         115,099        (228,661)         (229,807)                     
          1982         136,596        (228,661)         (318,667)                     
          1983          92,259         (69,870)         (294,885)                     
          (The differences between the total of business income and                   
          partnership losses reflected in the adjusted gross income figures           
          set forth above are attributable to a large net operating loss              
          carryover in 1983 and miscellaneous small items for the earlier             
          years.)                                                                     
               The partnership losses claimed on petitioners’ returns for             
          the years in issue were attributable to Mr. Barnhill’s investment           
          in an entity known as Winchester Oil and Gas Associates.                    
          Mr. Barnhill did not consult with Mrs. Barnhill before he made              
          that investment, and she had no actual knowledge concerning the             
          investment.  Winchester Oil and Gas Associates was part of a tax            
          shelter project commonly referred to as “Electra/Hemisphere”.  In           
          a Stipulation of Settled Issues filed May 18, 1994, petitioners             
          conceded that they were not entitled to the net operating losses            
          claimed on their returns for the years in issue relating to                 
          Winchester Oil and Gas Associates.                                          
               When the joint returns for the years in issue were presented           
          by Mr. Barnhill to Mrs. Barnhill for signature, she did not read            
          them or attempt to read them.  Mr. Barnhill told her that she was           
          required by law to sign the returns, and he assured her that                
          there was nothing wrong with the returns.  Mrs. Barnhill trusted            
          Mr. Barnhill to make wise decisions concerning financial and tax            
          matters.                                                                    




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