Joao Montoro and Neuza Paula - Page 9

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          (International) in partnership with Mrs. Joyner (Joyner).  Joyner           
          was petitioner-husband's English teacher in the United States.              
          Petitioner-husband and Joyner formed International to sell                  
          costume jewelry that they imported from Brazil.  Petitioners did            
          not attach a Schedule C (Profit or Loss From Business (Sole                 
          Proprietorship)) for International to their 1987 and 1988                   
          returns.                                                                    
               In 1989, Joyner transferred her interest in International to           
          petitioner-wife.  The record does not show how much petitioners             
          invested in the partnership or how much they paid Joyner for her            
          interest.  In 1989, petitioner-husband bought silver jewelry for            
          International to sell in the United States.  He attended trade              
          shows in San Antonio and other places to try to sell merchandise.           
               Petitioner-husband began to work full-time for International           
          in 1990.  International's sales of jewelry were poor, and the               
          company lost money in 1990 and 1991.  In 1990 and 1991,                     
          International was a sole proprietorship.  Petitioners attached a            
          Schedule C for International to their 1990 and 1991 returns.                
               International began to export electronic components to                 
          Brazil in 1990.  Petitioner-husband continued to export                     
          electronic components to Brazil in 1991 and stopped importing               
          jewelry from Brazil.  His export sales grew in 1991 and 1992.               
          International had gross receipts of $64,910 in 1990, $201,992 in            
          1991, about $400,000 in 1992, and about $1.3 million in 1993.               






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