Carl C. Poston III and Sherea A. Poston - Page 3

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          Respondent filed an answer to the petition denying all                      
          substantive allegations of fact and error contained in the                  
          petition.  In addition, respondent made affirmative allegations             
          of fact in support of respondent's determination that petitioners           
          are liable for additions to tax for fraud.  Specifically,                   
          respondent alleged that petitioners:  (1) Failed to file timely             
          income tax returns for the years 1987 through 1992; (2) failed to           
          cooperate with the revenue agent conducting the audit of their              
          tax liability for 1987 through 1993; (3) failed to maintain                 
          and/or provide respondent with complete and accurate records                
          concerning their income and expenses; (4) failed to provide the             
          account numbers or bank names for all accounts that they                    
          maintained during tax years 1987 through 1993; (5) fraudulently             
          and with the intent to evade the payment of tax understated gross           
          receipts in the amounts of $84,245.08, $166,894.49, $230,670.52,            
          $248,756.27, $359,718.81, $292,114.15, and $453,071.47 for tax              
          years 1987 through 1993, respectively; (6) fraudulently and with            
          the intent to evade the payment of tax failed to report $3,035              
          and $1,000 of other income received during tax years 1987 and               
          1992, respectively; (7) fraudulently and with intent to evade the           
          payment of tax claimed false net operating loss carry forwards in           
          the amounts of $19,455, $29,091, $36,439, $38,680, and $99,818 on           
          their income tax returns for 1988 through 1993, respectively;3              

          3  The correct tax years with respect to this allegation are 1988           
          through 1992.                                                               

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