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Year Amount
1985 $6,500
1986 15,000
1987 6,500
In February 1986, petitioners engaged John E. Shinn (Shinn),
a certified public accountant, to prepare the nursery's financial
statements and petitioners' 1985 income tax return. Mr. Gandy
asked Shinn to assist them in procuring more appropriate software
to manage their accounting and inventory functions. Shinn spent
a month or two at the nursery office while analyzing the
nursery's needs. As a result, petitioners purchased new computer
software that would track inventory as well as maintain the
nursery's books and records. This new system was installed
during mid-1987, and the vendor provided training to the nursery
employees.
Loans to Petitioners
Small Business Administration
Petitioners received loans from the Small Business
Administration (SBA). The first loan was in the amount of
$200,000 after a severe drought in approximately 1980 to 1981.
The second loan was for $500,000 in 1983 to 1984, after severe
winter weather damaged the crops. The purpose of the SBA loans
was to enable petitioners to restart their nursery after these
disasters. Petitioners placed the funds from these SBA loans
into certificates of deposit (CD’s). During 1985 and 1986,
petitioners made the following payments on the SBA loans:
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