Lucian T. Baldwin, III - Page 20



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          Tax Reporting                                                               
               LFI                                                                    
               On a Schedule F, Farm Income and Expenses, attached to                 
          petitioners’ 1987 Federal income tax return Form 1040,                      
          petitioners represented that Granot Loma was a Christmas tree               
          farm and claimed a depreciation deduction of $163,781 with                  
          respect to personal property with a book value of $1 million and            
          improvements with a book value of $2,255,000.                               
               On LFI’s Forms 1120S for 1988 through 1992, LFI reported the           
          following income, expenses, and net operating losses:                       
                               1988     1989    1990    1991     1992                 
          Income:                                                                     
          Lodging             -0-    $16,290    $233,285$154,373 $124,148               
          Tree removal               8,135                                            
          Auction                            305,567                                  
          Less:  Refunds               (1,414)                                        
          Other income                2,936   6,024           3,000                 
          Total income        -0-    25,947     544,876154,373  127,148                
          Expenses:                                                                   
          Salaries & wages   $284,437144,996      89,15380,192   33,908                 
          Repairs                    14,225           30,771   12,758                 
          Bad debts                                   9,958                           
          Rents                              2,000             2,856                  
          Taxes                      71,134     139,29758,494   80,155                 
          Depreciation       307,422 379,204     363,126314,419  275,043                
          Employee benefits          11,084           21,732   6,839                  
          Other expenses      375,147  301,289 403,580 239,342  176,417               
          Total expenses     967,006  921,932     997,156754,908  587,976                
          Net income or (loss)(967,006)(895,985)   (452,280)(600,535)(460,828)              
               BAC                                                                    
               On BAC’s Forms 1120S for 1988 through 1992, BAC reported the           
          following income, expenses, and net operating losses:                       












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