Larry G. and Mary L. Bangs - Page 5

                                         -5-                                          
          property.  They built a warehouse, a ripening room, and added               
          water pumps.  Petitioners also had a large well on the property             
          that was producing more water than necessary for the lemon trees,           
          so petitioners also decided to raise catfish.  They watered the             
          lemon trees with refuse or runoff water from the catfish tanks,             
          but when the catfish venture was unsuccessful, petitioners                  
          abandoned it.                                                               
               Mr. Bangs decided in 1994 to harvest some lemons.  He                  
          decided to harvest less than 4 years after planting the trees               
          even though he was aware that it would take 10 years before the             
          trees would fully produce.  He also knew that it might stunt the            
          growth of the trees but he was anxious to see how the lemon                 
          market worked.  Petitioners sold these lemons to a packing house            
          in Rancho Santa Fe and reported $469 of income from lemon sales             
          in 1994.                                                                    
               Mr. Bangs claimed that he spent 60 to 80 hours per week on             
          the lemon farming activity, and claimed that petitioners together           
          spent between 80 to 90 hours per week on the activity.  Mr. Bangs           
          pruned and weeded the tree area, repaired equipment, and did                
          other activities.  Mrs. Bangs did both physical work and kept the           
          financial records.  Petitioners did not employ any outside                  
          employees.                                                                  
               Mrs. Bangs was responsible for the financial records of the            
          farming activity.  The only financial records for the activity,             
          however, consisted of stacks of receipts.  Petitioners did not              






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