Richard D. Irving and Cynthia A. Burrough Irving - Page 3

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               On March 19, 2002, petitioners filed a joint 2000 Form 1040,           
          U.S. Individual Income Tax Return (the 2000 tax return).  On                
          Schedule C of the 2000 tax return, petitioners reported gross               
          receipts of $77,894 and the following business expenses:                    
               Advertising                             $850                           
               Car and truck expenses                  6,890                          
               Office expenses                         3,875                          
               Rent or lease                                                          
                    Vehicles, machinery, & equipment   15,400                         
               Supplies                                22,450                         
              Taxes and licenses                      100                            
               Travel, meals, and entertainment        1,175                          
               Wages                                   14,250                         
               Other expenses                          1,225                          
               Total                                   66,215                         
          Accordingly, petitioners reported net profit of $11,679,                    
          representing the total income reported by petitioners on the 2000           
          tax return.                                                                 
               On April 15, 2002, petitioners filed a joint 2001 tax return           
          (the 2001 tax return).  On Schedule C of the 2001 tax return,               
          petitioners reported gross receipts of $114,589 and the following           
          business expenses:                                                          
               Advertising                             $450                           
               Car and truck expenses                  5,710                          
               Office expenses                         3,650                          
               Rent or lease                                                          
                    Vehicles, machinery, and equipment   26,400                       
               Supplies                                31,642                         
               Travel, meals, and entertainment        1,572                          
               Wages                                   30,650                         
               Other expenses                           950                           
               Total                                   101,024                        








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