Floyd L. Garrett and Dorothy G. Garrett - Page 5

                                        - 5 -                                         
          Corporation           1989           1990           1991                    
          FGE                 $243,682       $291,930       $10,615                   
          TTI                 152,838        16,259         --                        
          BEL                 --             --             40,503                    
               Total          $396,520       $308,189       $51,118                   

          Petitioners do not dispute respondent's determination that these            
          expenses were improperly deducted by the corporations or that the           
          amounts are taxable income to them.  Most, but not all, of the              
          above expenses for FGI and TTI related to Mr. Garrett's                     
          personally owned muscle cars.  Additionally, the expenses                   
          disallowed to BEL were checks that were written by or for Mr.               
          Garrett.                                                                    

          Muscle Cars                                                                 

               1.  1989 Sale                                                          

               Prior to 1989, Mr. Garrett collected muscle cars as a hobby.           
          In January 1989, Mr. Garrett sold 25 automobiles from his muscle            
          car collection for $1.2 million.3  On their Federal income tax              
          return for 1989, petitioners claimed a basis of $800,000 in the             
          muscle cars sold.  In the notice of deficiency, respondent                  
          determined that petitioners failed to demonstrate that they were            
          entitled to any basis in the capital assets sold and, therefore,            
          realized a gain of $1.2 million from the sale of the muscle cars.           


               3After this sale, Mr. Garrett had 10 muscle cars remaining             
          from his original collection.                                               




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