David W. Hill - Page 6

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          return, and subsequently amend the return upon receipt of the               
          correct information.  Petitioner instructed Mr. Pressley that he            
          would rather file his return for 1989 based on the documentation            
          that he had at that time.  Petitioner’s 1989 Federal income tax             
          return did not reflect any income received from Mr. Hall.                   
               During the preparation of petitioner’s 1990 tax return, Mr.            
          Pressley again urged petitioner to obtain the information from              
          Mr. Hall, or, in the alternative, to estimate the amount of money           
          received from Mr. Hall.  Petitioner’s 1990 Federal income tax               
          return did not reflect any income from Mr. Hall.  Similarly,                
          petitioner’s 1991 Federal income tax return did not reflect any             
          income he received from Mr. Hall.                                           
               In October 1992, respondent began an examination of Mr. Hall           
          regarding his 1989, 1990, and 1991 taxable years.  James T.                 
          Givens, a revenue agent for the Internal Revenue Service,                   
          conducted the examination of Mr. Hall.  The main issue in this              
          examination concerned the deduction of expenses on Mr. Hall’s               
          returns.  Mr. Givens requested documentation from Mr. Hall in               
          order to verify the payment of these expenses.  Petitioner was              
          the largest recipient of these payments.                                    
               Mr. Hall engaged Roger Clark to reconstruct his records.               
          Based on his reconstruction, Mr. Clark prepared an affidavit for            
          petitioner's signature in order to substantiate Mr. Hall's                  
          deduction for contract labor.  On November 21, 1992, petitioner             
          signed an affidavit stating that he "received cash payments from            

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