Gerald L. and Erma L. Dunnegan - Page 2

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                                            Penalty, I.R.C.                           
                Year        Deficiency        Sec. 6662(a)                            
                1993      $135,811       $2,815.80                                    
                1994      3,628          725.60                                       
                1995      16,088         2,042.20                                     

               After concessions by the parties, the issues remaining for             
          decision are:  (1) Whether the monetary transfers that                      
          petitioners made to a corporation are capital contributions or              
          are bona fide debts that are deductible as business bad debts               
          under section 166 when they became worthless; (2) whether the net           
          profits and losses of petitioners’ fireworks businesses are                 
          attributable to Mr. Dunnegan or Mrs. Dunnegan for purposes of               
          self-employment tax; and (3) whether payments made to a                     
          charitable organization are business expenses or charitable                 
               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated, and the stipulated             
          facts are incorporated in our findings by this reference.                   
               Gerald L. and Erma L. Dunnegan (petitioners) resided in                
          Wichita, Kansas, when their petition was filed.  Petitioners                
          filed joint Federal income tax returns for the years in issue.              

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