Greg McIntosh and Sheila R. McIntosh - Page 3

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                                  FINDINGS OF FACT                                    
               Petitioners were notified by letter dated October 20, 1997,            
          addressed to their accountant, William Brown, that their Federal            
          income tax returns for 1995 and 1996 were to be examined by the             
          Internal Revenue Service (IRS).  At the same time, the IRS issued           
          a Form 4564, Information Document Request (IDR), related to those           
          years' returns.  Petitioners' Federal income tax return for 1994            
          was already under examination by the IRS, and some of the                   
          information listed in the IDR of October 20, 1997, relates to tax           
          year 1994.                                                                  
               The IDR was directed at obtaining books and records                    
          concerning petitioners' home-building income and expenses for               
          1994 through 1996 reported on Schedules C, Profit or Loss From              
          Business; underlying documentation of various Schedule C items;             
          business and personal bank statements and canceled checks for               
          1993 through January 31, 1997; and documentation for the sale of            
          a personal residence and for real estate taxes for 1996.                    
               On April 16, 1998, the IRS issued another IDR requesting               
          essentially the same information except with more specificity for           
          certain Schedule C items.                                                   
               On June 4, 1998, the examining agent met with Mr. Brown and            
          Greg McIntosh (petitioner).  At the meeting petitioner discussed            
          his wage activities and his Schedules C activity.  Petitioner was           
          employed as a dispatcher from March 1993 through July 1995 and              
          was unemployed between July 1995 and May 1996.  Between May and             

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