Mark D. and Sheldon C. Morgan - Page 2

                                        - 2 -                                         
                                             Accuracy-Related Penalty                 
                    Year      Deficiency           Sec. 6662(a)                       
                    1988      $ 1,351             ---                                 
                    1989      19,046              $3,809                              
                    1990      16,430              3,286                               
                    1991      16,436              3,287                               
          Pursuant to an amended answer, filed October 10, 1995, respondent           
          seeks a $9,864 increase in the deficiency for 1988, so that the             
          total amended amount of the proposed deficiency for that year is            
          $11,215.                                                                    
               Following concessions by petitioners, the issues for decision          
          are:                                                                        
               (1) The proper characterization (loans, as contended by                
          petitioners, or wages, as contended by respondent) of monthly               
          payments received by petitioner Mark D. Morgan from Robert Randall          
          Co. We hold that such payments  are  wages,  includable  in                 
          petitioners' income.                                                        
               (2) Whether petitioners are entitled to claimed employee               
          business expense deductions (for 1989, 1990, and 1991) for                  
          automobile expenses.  Because of petitioners' failure to provide            
          sufficient substantiation, we hold they are not.                            
               (3) Whether the increased deficiency asserted by respondent            
          for 1988 is time-barred.  We hold that it is not.                           
               (4) Whether petitioners are liable for the accuracy-related            
          penalty under section 6662(a) for 1989, 1990, and 1991.  We hold            
          they are.                                                                   






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