Derril O. Lamb, Jr. and Joyce Lamb - Page 4

            rigged specifically for harpooning tuna.  Mr. Lamb obtained the                               
            funds for this purchase in the form of a personal advance from                                
            Marriner Lumber Co.  Based upon his years of tuna fishing                                     
            experience, Mr. Lamb believed that he would be able to make a                                 
            substantial profit in the rising market.                                                      
                  On June 10, 1988, Mr. Lamb obtained a Federal Fisheries                                 
            permit, which allowed him to harpoon Atlantic bluefin tuna.  This                             
            permit allowed Mr. Lamb to harpoon an unlimited number of tuna                                
            per day until a total of 50 tons was caught by the tuna fishing                               
                  The tuna fishing season begins in mid-June and ends in late                             
            September.  From June 1 through July 2, 1989, Mr. Lamb was in                                 
            Africa on a big game hunt.  When he returned to Maine on July 3,                              
            the quota for tuna had already been filled.  This was the first                               
            time that the quota had been filled so early.  Therefore, Mr.                                 
            Lamb was unable to do any tuna fishing for the remainder of the                               
            season.  Mr. Lamb did not report any income or claim any                                      
            deductions for his tuna fishing activity on his Federal income                                
            tax return for 1989.  Mr. Lamb’s accountant, Gerald P. Nadeau,                                
            informed Mr. Lamb that he was entitled to a depreciation                                      
            deduction for the Lu-Joy for 1989, but Mr. Lamb refused because                               
            of his failure to do any fishing for that year.                                               
                  In an attempt to eliminate the quota problem he encountered                             
            in 1989, on June 7, 1990, Mr. Lamb changed his Federal Fisheries                              
            permit for Atlantic bluefin tuna to the “general category”.  This                             

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