Frank K. B. Wheeler - Page 12




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          and the $200 petitioner received for his work on the videotape              
          listed as item 5 in table 3.  These are all of the videotapes               
          that petitioner sold in 1993.                                               
               In 1994, petitioner sold only one video for $20.  This video           
          is item 1 in table 4.                                                       
               In 1995, petitioner sold $180 of videos.  As of the trial              
          date he had not yet collected the money from these sales.  These            
          videos are not listed in tables 1 through 4, and the videos were            
          for a project that petitioner was working on.                               
               Operation of Petitioner’s Activity                                     
               Petitioner did not formulate any written business plan or              
          make any substantive financial projections before starting his              
          videotape activity.  He did not have any written business plan in           
          existence from 1993 through 1995, forecasting his videotape                 
          activity’s income, expenses, or net profit or loss.  Petitioner             
          did not maintain separate bank accounts for his personal funds              
          and the funds from his videotape activity.                                  
               Petitioner had incurred $155,553 of costs for videotape                
          equipment by the end of 1995, of which $74,977 was incurred from            
          1993 through 1995.  Petitioner concedes that this equipment will            
          not appreciate in value.                                                    
               Petitioner did not spend any money on advertising from 1993            
          through 1995.  He relied solely on “word-of-mouth” to generate              
          sales of his videos from 1993 through 1995.  Petitioner did not             






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