Russell W. and Rebecca A. Willey - Page 2

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          section references are to the Internal Revenue Code for the year            
          in issue, and all Rule references are to the Tax Court Rules of             
          Practice and Procedure.                                                     
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          Petitioners resided in Wilmington, Delaware, at the time they               
          filed their petition.                                                       
               In 1991, Russell Willey made short-term loans (i.e.,                   
          repayment was promised within 6 months) of $200,000 to Casey                
          Foods, Inc. (Casey), $200,000 to Nanna's Treasures, Inc.                    
          (Treasures), and $70,000 to the Electra Group, Inc. (Electra).              
          The three companies invested the loan proceeds in the Euro-                 
          American Money Trust Fund (the trust fund).  The trust fund was             
          an independent, unrelated entity, and Mr. Willey did not have any           
          contact or dealings with anyone associated with it.  Mr. Willey's           
          loans were never repaid.                                                    
               In July of 1992, Treasures was in need of capital, so its              
          owner, Wanda M. Dugan, offered to sell 49 percent of Treasures'             
          stock to Mr. Willey.  After reviewing Treasures' operations,                
          financial records, and projections, Mr. Willey agreed to purchase           
          the 49-percent stock interest for $300,000.  Petitioners                    
          transferred $300,000 to Treasures but never received any                    
          Treasures stock.  In 1993, Ms. Dugan filed for bankruptcy, and in           
          1994 petitioners filed a proof of claim in the proceeding.  In              

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