Bill J. Malone, Jr. and Sarah J. Malone - Page 6

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          were insufficient funds in the Malone Music checking account,               
          petitioner would provide the needed funds, subject to                       
          reimbursement from the Malone Music checking account if and when            
          funds became available.  Petitioner viewed these advances as                
          small, short-term loans to Malone Music.                                    
               Malone Music does not advertise its services in any                    
          established publication.  From time to time, H and/or R create              
          and distribute leaflets and brochures for specific events or                
          classes offered by Malone Music in which they are identified as             
          the music leaders or “professors”.  In an attempt to attract                
          students, R, with the assistance of N, created a Web site for               
          Malone Music.  That Web site lists H and R as the only “contact             
          individuals” for Malone Music, and further identifies them as the           
          activity’s only instructors.                                                
               Petitioner assisted H and R with Malone Music for                      
          approximately two-plus hours each week during the years in issue.           
          During those years, Mrs. Malone devoted approximately 8 hours per           
          week to helping out with Malone Music.  Neither petitioner nor              
          Mrs. Malone provided any music lessons to anyone through Malone             
          Music.  Petitioner describes petitioners’ involvement in Malone             
          Music as “primarily administrative”.  Generally, petitioner                 
          assisted with paying any necessary expenses and purchasing                  
          musical instruments.  At the outset of Malone Music, Mrs. Malone            
          would “from time to time” monitor the music instruction, but her            

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Last modified: May 25, 2011