Michael D. and Christine R. Alexander - Page 3

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               Respondent determined a deficiency of $7,368 in petitioners’           
          1998 Federal income tax.  After a concession by petitioners,1 the           
          issues for decision are:  (1) Whether petitioners can deduct                
          interest paid on a home equity loan as an ordinary and necessary            
          business expense; (2) whether petitioners can deduct payments to            
          their son as wage expense; (3) whether petitioners can deduct               
          payments to their daughters as wage expense; and (4) whether                
          respondent is estopped from disallowing petitioners’ claimed wage           
          expense deductions.                                                         
               Some of the facts have been stipulated and are so found.               
          Petitioners Michael Alexander (Mr. Alexander) and Christine                 
          Alexander (Mrs. Alexander) are married and resided in Bandon,               
          Oregon, at the time their petition was filed.  Petitioners filed            
          a joint Federal income tax return for the taxable year 1998.                
          1.   The Tree Farm                                                          
               In 1990, petitioners purchased a parcel of land in Port                
          Orford, Oregon, and began operating a tree farm.  Over the next             
          several years, petitioners purchased various equipment for the              
          tree farm, including a tractor, two trailers, and a sprayer.                
          Petitioners paid more than $50,000 for the equipment, which they            

               1 Petitioners concede $22,815 of expense deductions claimed            
          on Schedule E, Supplemental Income and Loss.  The remaining                 
          adjustments in respondent’s notice of deficiency are                        
          computational; therefore, we do not address them.                           

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