Dean L. and Cynthia D. Sanders - Page 6




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                    Year      Income        Expenses        Excess                    
                    1987           $0   $299           $299                           
                    1988      1,571     8,010          6,439                          
                    1989      3,781     17,419              13,638                    
                    1990      12,971         44,451         31,480                    
                    1991      14,431         39,913         25,482                    
                    1992      36,801         42,722         5,921                     
                    1993      21,228         41,088         19,860                    
                    1994      61,637         54,707    (6,930)                        
                    1995      54,312         67,079         12,767                    
                    1996       27,106        23,400        (3,706)                    
                         233,838       339,088        105,250                         
          Horse Sales                                                                 
               Petitioner realized the following gains and losses from                
          sales of horses from July 1, 1990, through June 1, 1996:2                   
                              Number of      Gain                                     
                    Year      Horses Sold    (Loss)                                   
                    1990           3         $14,667                                  
                    1991           0         --                                       
                    1992           2         (6,726)                                  
                    1993           3         21,507                                   
                    1994           1         5,392                                    
                    1995           8         177,808                                  
                    1996           2         97,086                                   
                                             309,734                                  
          History of the Schedule F Activity                                          
               Beginning in 1985, petitioner entered into an activity with            
          a friend and co-worker Tom Coughlin (Coughlin).  Petitioner and             
          Coughlin purchased 50 or more acres in Arkansas, improved it,               
          named it the “C&S Ranch” (the Arkansas ranch), and conducted a              
          “cow and calf operation” thereon.  They also grew and sold fescue           


          2    The parties have stipulated the displayed data.  They have             
          also stipulated that petitioners reported an additional $7,000 of           
          proceeds from the sales of horses on the 1992 Schedule F.  Since            
          we cannot determine whether those proceeds represent a gain or a            
          loss, we shall disregard them in our discussion of gains and                
          losses realized from sales of horses.                                       



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