Wayne B. Bailey - Page 4




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          Cafe”.2  The concept involved a retail food and drink                       
          establishment that served coffee and related items during the               
          day, and wine and related items at night.  Petitioner and his               
          wife attempted to take a “two-pronged” approach to generating               
          income from the Tasha’s Cafe concept.  The first “prong” was to             
          open a retail location in which petitioner and his wife could               
          operate an actual wine and coffee bar.  The second “prong” was to           
          sell the concept to entrepreneurs as a franchise.                           
               Petitioner outfitted the basement of his home in the style             
          of the proposed coffee and wine bar to determine the appearance             
          and operation of Tasha’s Cafe and to model the concept for                  
          potential investors, local businesspeople, and franchisees.  In             
          his basement, petitioner installed restaurant-level food service            
          equipment, coffee- and wine-related artwork, and two different              
          types of flooring for testing purposes.  Petitioner brought                 
          between 200 and 250 people to his basement model to promote the             
          retail coffee and wine bar aspect of his business.  Petitioner              
          brought approximately 30 potential franchise customers to his               
          basement to demonstrate the franchise possibilities of Tasha’s              
          Cafe.  While petitioner demonstrated the Tasha’s Cafe concept, he           
          served coffee, wine, and food.  Petitioner was never paid for the           


               2  For 2001, petitioner filed Form 1040, U.S. Individual               
          Income Tax Return, with a filing status of single.  For 2002,               
          petitioner filed Form 1040, with a filing status of head of                 
          household.                                                                  





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Last modified: November 10, 2007