Robert B. and Betty D. Harris - Page 6




                                        - 5 -                                         

          indefinite period of time.  Mr. Bell anticipated that it would              
          take a minimum of 18 to 24 months to structure accounting and               
          administrative departments and have them running smoothly enough            
          that petitioner’s full-time presence and participation would no             
          longer be required.                                                         
               During 1994, 1995, and 1996, petitioner worked for Bellmark            
          in Los Angeles 287, 281, and 282 days, respectively.  He was paid           
          $97,200 for his Los Angeles work during 1994; however, he did not           
          receive the agreed upon compensation for 1995 or 1996.  Moreover,           
          petitioner was not reimbursed by Bellmark for any expenses                  
          incurred in the years at issue.  Nevertheless, petitioner                   
          continued to devote the majority of his time to Bellmark in the             
          hopes of eventually receiving such moneys.3                                 
               On their joint Federal income tax return for 1994,                     
          petitioners included a Schedule C, Profit or Loss From Business             
          (Schedule C), in connection with petitioner’s financial and tax             
          consultant business.  That Schedule C included the following                
          income and expenses:                                                        





               3    The principal reason why petitioner was not compensated           
          and reimbursed was that some of the recordings of Bellmark                  
          contained the musical talents of several artists, and each of               
          those artists was entitled to royalties, an element which was               
          apparently not anticipated by Mr. Bell or petitioner and that               
          apparently heavily drained Bellmark’s resources.                            





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