Bill J. Malone, Jr. and Sarah J. Malone - Page 7

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          involvement, “in the big picture”, was generally “fairly rare”.             
          Petitioners did not keep any records with respect to the time               
          they devoted to Malone Music during the years in issue.                     
               Progress reports and payment records for the students of               
          Malone Music were maintained by H and R.  Certain aspects of                
          Malone Music’s financial activities were recorded using a                   
          commercial computer software program (the program) that was also            
          used for petitioners’ personal finances.  With respect to Malone            
          Music, the program was used to record information rather than to            
          generate financial statements or other analytical reports.                  
               Petitioners pay for music lessons and purchase musical                 
          instruments for the Malone children.  The quantity and the                  
          quality of the musical instruments purchased by petitioner depend           
          on the financial performance of petitioner’s law practice.  When            
          petitioner’s law practice is profitable, petitioner looks for               
          “good quality instruments” to purchase.  As of the date of trial,           
          the musical instruments purchased by petitioner include:  Two               
          Steinway pianos, an upright piano, eight violins, a viola, a                
          harp, a trumpet, three guitars, and two banjos.  The musical                
          instruments are used by all of the Malone children in their music           
          lessons and practice, as well as by H and R in their capacities             
          as Malone Music instructors.                                                









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