Terrell Equipment Company, Inc., et al. - Page 6




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          accounting classes.  Janet graduated from high school and never             
          attended college.                                                           
               TECO issued Forms 1099-MISC, Miscellaneous Income, to Vernon           
          for 1987, 1988, and 1989.  The Forms 1099 listed nonemployee                
          compensation in the amounts of $5,250, $18,300, and $68,000 for             
          1987, 1988, and 1989, respectively.  Vernon and Janet believed              
          that the amounts listed on these Forms 1099 covered the amount of           
          personal expenses paid for, and withdrawals made by, Vernon out             
          of TECO’s funds.  Vernon and Janet mailed these Forms 1099 to the           
          IRS.                                                                        
               Janet handled all of Vernon’s personal finances.  Janet                
          prepared the joint individual Federal income tax returns filed by           
          Janet and Vernon for the years in issue.  Vernon did not sign the           
          return for 1987.  He was out of town at the time Janet prepared             
          it, and he did not review the return prior to its being filed.              
               On TECO’s Forms 1120, U.S. Corporation Income Tax Return,              
          for TY 1987, TY 1988, and TY 1989, TECO reported overpayments of            
          taxes in the amounts of $14,187.50, $66,674.56, and $81,561.09,             
          respectively.  Janet and Vernon’s Form 1040, U.S. Individual                
          Income Tax Return, for 1988 also reported an overpayment of                 
          taxes.  For each of these taxable years, instead of taking a                
          refund, petitioners requested that the overpayment be applied to            
          the next year’s estimated taxes.                                            
               In 1990, Vernon and Janet separated.  They later divorced.             






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