Eugene A. Sanders - Page 8

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          respondent, then petitioner should “consider having an                      
          independent accountant or attorney review this matter”.                     
               On March 6, 1992, respondent sent to petitioner a letter               
          which again informed petitioner that Durham was under examination           
          for the 1989 taxable year.  The letter further stated that “any             
          adjustments proposed to this entity could have a tax effect to              
          your return”.                                                               
               On May 15, 1992, petitioner filed his 1991 Federal income              
          tax return and reported business income and income on Schedule F,           
          Profit or Loss From Farming, of $54,347 and $51,657,                        
          respectively.  Durham issued petitioner a Schedule K-1 for the              
          period ending September 30, 1991, which reported $94,050 as                 
          petitioner’s distributive share of the ordinary loss from Durham.           
          Attached to the Schedule K-1 was a Form 8271 which identified               
          Durham as a tax shelter.  On a Schedule E attached to the 1991              
          return, petitioner reported a partnership loss of $94,050.                  
          Petitioner also claimed an individual retirement account                    
          deduction of $2,000 on his 1991 return which was related to his             
          Hoyt investment.                                                            
               On May 1, 1995, respondent issued a notice of final                    
          partnership administrative adjustment (FPAA) to the tax matters             
          partner, as well as to petitioner, with respect to Durham’s 1991            
          taxable year.  The FPAA determined that Durham had failed to                
          substantiate many of its claimed deductions.  These deductions              

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