Floyd L. Garrett and Dorothy G. Garrett - Page 8

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          Mr. Garrett's intention to transfer ownership of the muscle cars            
          to FGMCI as well.                                                           

          Preparation of Petitioners' Tax Returns                                     

               Petitioners' tax returns were prepared in accordance with              
          information that Mr. Garrett supplied to his certified public               
          accountant, James Knutzen.  Mr. Knutzen's firm performed                    
          accounting work for petitioners from 1978 until 1991.  In                   
          addition to preparing petitioners' Federal income tax returns,              
          Mr. Knutzen's firm prepared monthly financial statements, as well           
          as quarterly and annual payroll tax returns for FGI and TTI.  In            
          preparing these documents, Mr. Knutzen's firm relied on bank                
          statements, coded checks, receipts, and other information                   
          provided by Mr. Garrett or a representative of his corporations.            
          Knutzen never audited petitioners or any of Mr. Garrett's                   
          companies.  Although Mr. Knutzen was aware of Mr. Garrett's                 
          muscle car collection activities, his firm never reflected those            
          activities as a business on petitioners' income tax returns for             
          the years in issue.                                                         


          Issue One:  Basis in the Muscle Cars Sold in 1989                           

               The first issue for decision involves petitioners' proper              
          basis in a collection of muscle cars sold in 1989 for $1.2                  

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