Charles E. & Sandra A. Anderson - Page 3

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               From the appropriate government agencies, petitioners                  
          obtained the permits, licenses, and certifications required to              
          operate the Inn as a bed and breakfast.  Petitioners also                   
          obtained membership in a local bed and breakfast trade                      
          association and in the local chamber of commerce.                           
               In 2000, petitioners’ Inn had 289 separate room rentals from           
          which petitioners received rental income of $26,476.                        
               Petitioners’ Inn has 5,664 square feet of useable floor                
          space and consists of three floors -- a main floor, an upstairs             
          floor, and a basement.                                                      

          Main Floor                                                                  
               The main floor of petitioners’ Inn consists of a living                
          room, a dining room, two bedrooms, two bathrooms, a sewing room,            
          a lobby, a registration area, an office, a kitchen, a laundry               
          room, and stairs leading to the upstairs floor.                             
               Petitioners and petitioner Sandra Anderson’s parents                   
          exclusively use the two bedrooms, the two bathrooms, and the                
          sewing room for personal purposes.                                          
               The living room and the dining room are used exclusively by            
          paying guests of the bed and breakfast, and the stairs are used             
          exclusively in operating the bed and breakfast.                             
               The balance of the main floor (lobby, registration area,               
          office, kitchen, and laundry room) is used both for business in             
          operating the bed and breakfast and by petitioners for personal             





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