Frank H. and Marla C. Black - Page 9

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          Home Federal application, they listed under “ASSETS” a “BRADFORD            
          MONEY MARKET” account valued at $9,000.  On the “PERSONAL                   
          STATEMENT” attached to the Home Federal application, petitioners            
          stated that they possessed “Cash on hand and in banks” totaling             
               IRS Revenue Agent Robin Helton (Agent Helton) was assigned             
          to examine petitioners’ joint returns for the taxable years 1987,           
          1988, and 1989.  Petitioners’ 1987, 1988, and 1989 income tax               
          returns reported taxable income of $76,332, $44,581, and $26,791,           
          respectively.  Petitioners later agreed to deficiencies for                 
          taxable years 1987, 1988, and 1989.                                         
               On May 8, 1990, Agent Helton conducted an initial interview            
          with Mr. Black in connection with her examination of petitioners            
          for the years 1987, 1988, and 1989.  During that interview, she             
          questioned Mr. Black about what was the “most cash you had on               
          hand during the tax year,” to which Mr. Black responded that                
          petitioners kept no great amounts of cash on hand.  At no time              
          during Agent Helton’s investigation did petitioners ever claim to           
          have had large amounts of cash on hand.                                     
               On February 18, 1987, petitioners received a check of                  
          $69,133.31 from the sale of a residence owned by Mrs. Black,                
          which they deposited into one of their bank accounts during 1987.           

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