Stephen R. and Mary K. Herbel - Page 3

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             contends, or whether the payment is a deposit in the                     
             nature of a loan, as petitioners contend.  In addition to                
             petitioners' motion for summary judgment and memorandum                  
             in support thereof, respondent's notice of objection and                 
             memorandum in support thereof, and petitioners' reply, the               
             parties have filed a stipulation of facts in each of the                 
             consolidated cases, together with exhibits attached                      
             thereto.  The stipulations and accompanying exhibits are                 
             incorporated by this reference.  The facts set forth in                  
             this opinion are taken from the pleadings and                            
             the stipulations of facts.                                               

                                     Background                                       
                  Respondent issued a notice of deficiency to Stephen R.              
             and Mary K. Herbel, petitioners in the case at docket No.                
             22079-93, in which respondent determined the following                   
             deficiency in, and additions to, their 1988 tax:                         

                                      Additions to Tax                                
                  Deficiency     Sec. 6653(a)(1)     Sec. 6661(a)                     
                  $42,725        $2,136              $10,681                          

             All section references are to the Internal Revenue Code as               
             in effect during 1988, unless stated otherwise.  Respondent              
             also issued a notice of deficiency to Jerry R. and Carolyn               
             M. Webb, petitioners in the case at docket No. 22080-93,                 






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