Carl W. and Barbara H. Patterson - Page 9

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          and Mr. Trueheart did not render any services for petitioner                
          after 1990.                                                                 
               Petitioner paid Mr. Trueheart $1,000 in December 1990 for              
          Mr. Trueheart's services.  Petitioner did not pay Mr. Trueheart             
          any further amount.                                                         
               Petitioner continued to engage in the commercial real estate           
          market in 1991 and 1992.  Petitioner reported income and expense            
          from his commercial real estate activities for those years on               
          Schedules C (Profit or Loss from Business).  On his Schedule C              
          for 1991, petitioner deducted travel expense in the amount of               
               In mid-1992, approximately 1-1/2 years after Mr.                       
          Trueheart's letter dated December 20, 1990, petitioner flew to              
          Texas and met with Mr. Trueheart's associate Dan Bendinger (Mr.             
          Bendinger) ostensibly to discuss options for recovering the                 
          $55,000.  Mr. Bendinger reported to petitioner that no work had             
          been performed on petitioner's case since 1990 and that the                 
          prospects of recovering $55,000 from Mr. Suiter were poor.                  
               Petitioner never filed a lawsuit to recover any amount from            
          Mr. Suiter.                                                                 
               On his Schedule C for 1992, petitioner deducted a loss in              
          the amount of $30,000 for "exten[s]ion consideration fee to Darby           
          Suiter of Houston, Texas for investment purchase".  Petitioner              
          did not deduct on his 1992 Schedule C the additional $25,000 fee            
          paid to Mr. Suiter in 1990.                                                 

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